Second Mortgage in Charge-Off Status

What are the ramifications of a second mortgage in charge off status?

My husband is unemployed and we have fallen behind on our first and second mortgage. We have a plan setup that should take care of the first mortgage, but our second mortgage is in charge-off status. My question is would it be okay to let it get charged-off? What are the ramifications of this?

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Bill's Answer
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Highlights


  • If you default on your second mortgage, the mortgagee can foreclose.
  • Try to work out a forbearance plan.
  • Bills.com offers additional information for people in default on their second.

Before addressing the central issues in your question, let us define charge off.

Charge Off

Charge-off (sometimes called write-off) is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of the last payment. The fact an account is charged-off does not mean the debt may not be collected later. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings. I explain more about the ramifications of a second mortgage in charge-off status in just a moment.

Quick tip

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A charged-off account does not mean:

  • The debt is canceled
  • The debt is forgiven
  • The creditor forfeits a right to collect the debt

The creditor may move a charged-off account to its own internal collections department, or sell the debt to a third-party collection agency.

Second Mortgage Foreclosure

Home loan lenders have the right to foreclose if you fail to make your payments for any mortgage. The fact a second mortgage is in a junior position to the first mortgage does not prevent the second mortgage lender from foreclosing.

Try to work out some sort of a payment arrangement with your lender for the second mortgage to avoid a foreclosure. The foreclosure process varies from state to state, but generally takes from two to 18 months depending on the terms of your loan and your state of residence. However, a good rule of thumb is the bank can proceed with the foreclosure process if mortgage payments are not received within 150 days. See the Bills.com Foreclosure Rules resource to learn the specific rules for your state.

If a foreclosure occurs, the second mortgage is paid after the first mortgage is repaid in full. If the sale price is less than the value of the mortgages held against it, then in most states you will owe a deficiency balance. The good news is a deficiency balance (if it exists and if your lenders pursue collections) is an unsecured debt you can enroll in a debt settlement program. However, some states outlaw the collection of mortgage deficiency balances. See the Bills.com Anti-Deficiency resource to learn the rules for your state.

Quick Tip

Wrestling with a tough unsecured debt problem? Take your questions to the Bills.com Debt Coach for an online, no-nonsense, no-cost analysis of your options and the cost of each.

Here is the good news: Lenders don’t like to foreclose on mortgages. Foreclosures are costly, so lenders foreclose only as a way of limiting losses on a defaulted loan. If homeowners get behind on payments, lenders will most likely work with them to bring the loan current.

To do so, however, communicate with the lender and be honest about your financial situation. The lender’s willingness to help with current problems will depend heavily on past payment records. If you have made consistent, timely payments and had no serious defaults, the lender will be more receptive than if the person has a record of unexplained late payments. If you are falling behind in payments or who know you are likely to do so soon, contact your lender right away about meeting to discuss alternative payment arrangements.

Loan Workout Plan

An agreement between borrower and lender to prevent the loss of a home is called a loan workout plan. It will have specific deadlines that must be met to avoid foreclosure. Therefore, it must be based on what the borrower really can do to get the loan up to date again. The nature of the plan will depend on the seriousness of the default, prospects for obtaining funds to cure the default, whether the financial problems are short-term or long-term, and the current value of the property.

If the default is caused by a temporary condition likely to end within 60 days, the lender may consider granting temporary indulgence. Those who have suffered a temporary loss of income but can demonstrate that the income has returned to its previous level may be able to structure a repayment plan. This plan requires normal mortgage payments to be made as scheduled along with an additional amount that will end the delinquency in no more than 12 to 24 months. In some cases, the additional amount may be a lump-sum due at a specific date in the future. Repayment plans are probably the most frequently used type of agreement.

Foreclosure, Generally

Foreclosure is a serious situation that has serious repercussions. If you can, you want to avoid a foreclosure as much at all costs. Bills.com is here to help. We also offer helpful guides, foreclosure FAQs, glossary terms, and other helpful tools to help you keep your home and avoid a bank repossession.

You can find more in depth information about foreclosures on our Bills.com foreclosure information page. See also Home Affordable Foreclosure Alternatives Program.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

267 Comments

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  • 35x35
    Mar, 2013
    Stacy
    My situation is slightly different. I live in AZ and have rec'd 1099-C Cancellation of Debt, but I have not rec'd a Release of Lien. After speaking with BOA, it appears as though they will not to send me one. Bank of America says, "Just because they forgave the debt doesn't mean they will release the lien until the debt is paid in full."

    Any suggestions as to how to obtain a Release of Lien or a Release Certificate so I can refi and get away from Bank of America?

    Thank you for this type of forum! as most of us can't afford to hire and attorney and need to do this leg work ourselves.
    0 Votes

    • 35x35
      Mar, 2013
      Bill
      What you are experiencing with the 1099-C would not be out of place in Alice In Wonderland. Bank of America's explanation is accurate: A lender that issues a 1099-C may continue to pursue the borrower to collect the debt. Of course, this seems absurd because the 1099-C's title contains the plain language "Cancellation of Debt," which anywhere else in the English-speaking world would imply the lender abandoned hope of collecting the debt and declares to the federal government the IRS should consider the amount cancelled as income for the borrower. But no, that's not quite what a 1099-C means. Borrowers still owe a debt "cancelled" in a 1099-C.

      You asked how to rid yourself of the loan and lien. You have two options:
      • Negotiate a settlement for less than the balance due. You have some leverage now that Bank of America has written-off the loan and has moved it out of its current accounts ledger.
      • Talk to a bankruptcy lawyer to learn if filing a chapter 13 would strip the lien on what I assume is a junior mortgage/deed of trust.
      0 Votes

  • 35x35
    Jan, 2013
    Susanna
    Hi, I just wrote a few minutes ago and wanted to add that both my 1st and 2nd mortgages are with Chase. The guy on the phone that told me a payment in full or a settlement was the only way to avoid foreclosure said "look at it from our point of view, you have equity in your home, you could sell it, pay it off, and still walk away with money." We want to stay in our home. We've lived here many years, and could never buy in this neighborhood again. Where would we go anyway? We could afford to buy another house, or get a loan!
    0 Votes

    • 35x35
      Jan, 2013
      Bill
      For the benefit of other readers, whether the personal liability for a junior mortgage or deed of trust is discharged in a bankruptcy, a homeowner stopping their monthly payments allows the mortgage lender to foreclose. Again for the benefit of other readers, always consult with your bankruptcy lawyer about which payments you should and should not make when you file a bankruptcy. Failing to do so can result in unintended consequences, as Susanna's comments here illustrate clearly.

      Susanna, consult with your bankruptcy lawyer immediately, and ask him or her to negotiate a settlement with Chase on the junior mortgage. The good news here is the Chase representative indicated a willingness on the part of the lender to negotiate a settlement. By all means, take them up on the offer and have your lawyer start talking to Chase now.
      0 Votes

  • 35x35
    Jan, 2013
    Susanna
    I just went through bankruptcy, it was discharged a few months ago. Reaffirmed my home with approximately 90,000 left on the mortgage. Also have a second mortgage (home equity loan) that I owe almost 30,000 on. My home is valued at approximately 180,00 - 200,000. First mortgage payments have been paid on time for years, the Home equity payments also, until the time of filing more than a year ago. We stopped making the home equity payments when we filed because we thought that portion was being discharged (not sure why we thought that). We just called the bank (Chase) to find out how to pay and get caught up and were told it was too late, it has been charged off and would be forclosed! We have enough money to make all missed payments and income to resume the loan, but they said no. They said they may make a settlementand to send them an offer. We are not sure what to do, as we only have around 5000. I'm sure no one would lend us the money this close after foreclosre. Any advice?
    0 Votes

  • 35x35
    Jan, 2013
    J
    My boyfriend did a HAFA modification of his 1st mortgage. His 2d mortgage is with BOA. They sent him a letter stating that his 2d mortgage didn't qualify for a HAFA modification because his payment was under $100/mo. He just got a letter stating that his 2d mortgage has been "charged off" asking him to contact BOA to work out a payment arrangement. The letter states that a payment must be made within 10 days of the date of the letter. Thing is that he received the letter 11 days after it was dated. Thoughts? Strategy? Amount owing is $20K. House might be worth what the 1st mortgage balance is but is more likely slightly underwater. Do you think an offer of 10% of the balance would fly? If they take the offer do they have to relinquish the lien?
    0 Votes

    • 35x35
      Jan, 2013
      Bill
      I recommend contacting the bank as soon as possible, explaining that the letter was just received, and working to reach an agreement. In terms of the percentage to offer, there is no fixed amount. Start low, at 10-15%. You can increase the offer, if necessary but not reduce it. If the agreement is to settle the debt in full, bringing it to a $0 balance, the lien would not remain in force. Get any agreement in writing and keep the correspondence, so you can prove that the debt was settled, in case you need to demonstrate that to another creditor.
      0 Votes

  • 35x35
    Oct, 2012
    kay
    have 2nd mortgage on house. Will not sign subordination agreement. Have 1st mortgage going through mod, but need subord agreement from 2nd mortgage to make final. If 2nd mortgage wrote off loan, can I take this information ie credit report to title company and have them refile a title taking 2nd mortgagee off lien?
    0 Votes

    • 35x35
      Oct, 2012
      Bill
      Even if the second mortgage writes-off the loan, it is not forfeiting its lien position. I don't believe there is much you can do short of paying off the second or settling it for a reduced amount that brings the debt to a $0 balance.
      0 Votes

  • 35x35
    Aug, 2012
    Christine
    I would like to ask for legal advice. A property owned by my aunt was redeemed by my father, since my aunt didn't have enough fund to pay for the mortgage. So my father paid for it. In exchange for the payment, he was given by my aunt the SPECIAL POWER OF ATTORNEY to sell the property. Unfortunately, my father met an accident and died last year. My aunt is now claiming for the property since the one given the authority to sell already died. We are 7 siblings in the family left together with our mother. Do we have the right to the property since we have a proof that our father redeemed it? thank you
    0 Votes

    • 35x35
      Aug, 2012
      Bill
      Christine, your excellent question needs to be addressed to an attorney. You should be able to get a free consultation with an experienced probate attorney. Take any proof you have of what your father received in exchange for paying for your aunt's mortgage. It could be the case that the right to sell the property expired with your father's passing. It could be the case that the underlying claim to the property passed on to his heirs. Only an attorney can help you answer this properly.
      0 Votes

  • 35x35
    Aug, 2012
    John
    I am hoping you might be able to help me with this. We got a second mortage and our lawyer was very crooked back in 2000 and tied what we owed on our camper to our house. The loan got bought out from PNC bank by ostrowitz & ostrowitz. This is not where the problem is though. They have us paying to them (which is no problem), but upon requesting what we still owe, we were told basically tough luck, keep records yourself. I have tried repeatedly calling to ask them what our balance is and they refuse to give us any sort of record. Therefore, we have no idea if we are close to paid off, if they are just going to keep collecting our fixed income until we die or what. Is there anything we can do in this situation?
    0 Votes

    • 35x35
      Aug, 2012
      Bill
      Consult with a lawyer. First, ask him or her to send a firm but polite letter to the lender asking for an amortization table on your remaining balance. Second, if this goes nowhere, ask him or her about stopping payment on the loan in an effort to bring the lender to the table with a few facts about your loan.
      0 Votes

  • 35x35
    Feb, 2012
    steve
    I was forgiven my second morgage and was discharged last year chapter 13 in october can i know sell my house for a profit since the second morgage is gone i do have equity or can my creditors come after me for monies.My att. told me that since it is not filed with the courts yet the case is tech.still open and they could come after the poss. come after the money
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Your lawyer has more facts about your case at his or her hands than I do, so it would be foolish for me to comment on your situation.
      0 Votes

  • 35x35
    Feb, 2012
    omar
    I claimed bankruptcy in 10/11 but did not include my house, which is upside down. I owe $275k on the first but the second I owe $350k with Chase. The second gave me a modification which is unaffordable. I told them I can no longer make the payment and they suggested that I ask for a settlement review. They also want to see proof of funds when I make my offer. What should I offer or what would be reasonable? I have a steady job but pay $1,700 on the first and $1,100 on the second. My take-home is only $4,300 monthly and I have three children.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      The first sentence in your message confuses me for three reasons. First, all debts are supposed to be included in a bankruptcy filing. Second, even if you could pick and choose which debts to include in a bankruptcy, I am confused why you would not include an upside-down mortgage. Third, given your income, I wonder why you did not realize the mortgage was such a large fraction of your take-home pay when you filed for bankruptcy.

      "Reasonable" varies according to the situation. I suspect there are more relevant facts to your case than what you shared. Accordingly, I urge you to consult with a lawyer in your state who has experience negotiating with mortgage companies.
      0 Votes

    • 35x35
      Jul, 2012
      Jaymin
      Not sure where you were educated in bankruptcies; but, all debts are not included!!! You can choose which debt is included. Depending on state law it might not be beneficial to include a mortgage in the bankruptcy. Most secured debt included in a bankruptcy is given back to the lender; so, they can liquidate and get some of their money back. So, if you want to keep your house, I guess the question would be... Why would you include your mortgage in the bankruptcy? You should have asked what type of bankruptcy did you file; before you even attempted to answer the question!
      0 Votes

    • 35x35
      Jul, 2012
      Bill
      According to the US Bankruptcy Code, a person filing for bankruptcy protection must schedule "all entities holding claims" in their filing. A debtor must state, under oath, they listed all of their assets and all of their creditors. I would be very interested to read about any exceptions to that rule in the US Bankruptcy Code.

      You asked why anyone would include a mortgage in their bankruptcy. First, to comply with the law the debtor must include all claims against them, including mortgages. Second, a property owner may not lose their property in a bankruptcy. Depending on the debtor's circumstances and the exemptions rules in the debtor's state, the debtor may be able to protect some or all of their property's equity with an exemption. In many circumstances, a debtor will be able to retain ownership of their property if they continue to make their house payments. One benefit bankruptcy has for homeowners with mortgages is the bankruptcy discharge will remove the homeowner's personal liability for the loan. A first mortgage's lien remains, so the lender retains the ability to foreclose if the borrower defaults on their monthly payments.

      As implied in your message, financial circumstances vary by person. A debtor considering bankruptcy should consult with a lawyer who has bankruptcy experience to discuss all of their options and the costs of each.
      0 Votes

  • 35x35
    Feb, 2012
    Fred
    My situation is a little different.I have equity. I have a first that by the grace of god after fighting for it i got a Modification with BOA(280,000.00).My second loan is with PNC who will not help at all. They really are a different breed.They are a one way street. They are threatening to foreclose and put account in chage-off without warning.They claim i have equity and tell me since i am charged off they cant do a payment plan or anything of such. They will only take a settlement offer. So i wrote my hardship letter and offererd ten percent on 150,000.00. They told me that i insulted them and said they are pushing for forecloser. I asked to take to the super and she said the lowest they will do is 60,000.00. I really cant get this amount so im hoping that later they will come down.Someone told me that after forecloser starts you can do mediation with a lawyer? I dont want to lose our house and can not beleive how these banks took our tax money to bail them out and then turn around and put the people who saved them out on the street with kids and could really care less! Sorry to vent Thank you this site really helps in many ways.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Consult with a lawyer now. For example, Nevada offers an excellent mortgage mediation program the other states should adopt. Your state may offer a mediation program too. If not, a lawyer with foreclosure background may be able to negotiate a deal with PNC that both parties can live with.
      0 Votes

    • 35x35
      Feb, 2012
      Saqib
      I'm in the exact situation you are, ie PNC has my second mortgage and is not willing to negotiate as my account has gone into charge-off. Send me a message on my email address - vtmuslim@gmail.com and I'd like to compare notes on how to deal with PNC. Thanks.
      0 Votes

  • 35x35
    Jan, 2012
    Wayne
    Florida I became unemployed 2 yrs ago. My home value went from 180K to 100k. I owe 140k on my first mortgage and 7k on second. I am behind 21 months on the first. 12 months on second. Chase who owns the first sent me a letter saying if I did a Title in Liew of Payment they would accept and would write off difficency. But I have to have a free title. I called the Bank that holds the second and they said my second was written off and given to a collection agency. Upon talking to collection agency and my circumstances, they offered no solution, just that I would have to pay. When they write off the loan is there still a lien on the house. Is my only other option to let the first forclose, then file Chapter 7.
    1 Votes

    • 35x35
      Jan, 2012
      Bill
      The terms "write off" and "charge off" have meaning in the accounting world, but not in the legal world. A court does not look at charged-off debt any differently from debt the creditor has on its current account ledger. "Write off" and "charge off" does not mean the account is canceled, forgiven, or extinguished. See the Bills.com resource Charge Off for a more complete discussion of this oft-misunderstood phrase.

      Consider offering the collection agent a lump-sum settlement of the debt.

      Consult with a bankruptcy lawyer to discuss your options. You need not wait for foreclosure to free yourself for the personal liability for the debt. In fact, doing so now may give you more leverage in dealing with the collection agent.
      0 Votes

    • 35x35
      Jul, 2012
      Ned
      Hi Bill, I live in MI. I did a shortsale in 2008. i have 2 mortgages 1st and a 2nd. My 1st mortgage company setteled for less However my second mortgage company recieved small portion from the closing but was not satisfied. When i pull my credit report now it shows it is a CHARGE OFF. If i purchase another house, or if i by a business, or have money in th bank can they come after me to get their money back? I am afraid that if i purchase a house that they would put a lien against my New property. How long does the CHarge Off drops completely? Thank you very much Bill.
      0 Votes

    • 35x35
      Jul, 2012
      Bill
      Ned, the derogatory charge-off account will stay on your credit report for 7½ years from the date of first delinquency. Prior to that, negotiating a pay-for-delete would be one way to get the account off your credit report.

      The only way a creditor can place a lien against you and your property is to first get a judgment against you, after suing you.

      If the account currently shows on your report as a collections account, a lender may require you to pay it off before agreeing to fund any loan you seek.
      0 Votes

  • 35x35
    Jan, 2012
    Heidy
    Hi, I fell behind on my mortgage back in 2009. I have 1st and 2nd mortgages. I applied for a loan modification and got approved for the 1st mortgage. My second mortgage at that time $85,000, was sold to a third party. Now I owe the 2nd mortgage $109,000. I lost my job and got a new job recently. All that I am earning now, goes to my monthly debts. I could borrow some money from a family member to make a settlement, but dont know what a good amount to offer them would be.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      There is no clear answer on how much to offer in a settlement. Key factors are your ability to pay and the aggressiveness of the creditor. If your income could be garnished, for instance, the creditor may be unwilling to negotiate a settlement, even if you offer a large amount. If, on the other hand, your income and assets are safe from a creditor's reach or if you could discharge the debt in a bankruptcy, a small amount settlement offer could be successful. A general rule is to start low in any negotiation. You can always increase your offer, if need be. I suggest that you start at 10-15%, if you can afford it.
      0 Votes

  • 35x35
    Dec, 2011
    Samir
    I live in MN and have a first and second from Wells Fargo. I owe 290K on first and 80K on second. I am trying to work out a short sale. Wells Fargo (1st) is ready to accept the buyer offer of 280K. After settlement 1st will get 245K. But the 2nd won't get anything. I offered 16K towards settlement at closing. Wells won't even consider it. They want me to sign a promisory note that I will pay back the deficiency. I intend to leave US and go back to my home country. My attorney suggests me file for bankruptcy and get rid of the second. I don't want to do it but paying 80K from India will be a payment of lifetime!!!
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      I am not sure why they want you to sign a promissory note, as you might still be liable for the debt after the short sale regardless. If you will not be liable you certainly have no reason to sign the note, and if you are liable, then the second mortgage holder will likely proceed to collect on the loan through a court judgement.

      I recommend that you follow your lawyer's advice. If you wish to avoid a bankruptcy, speak again with the lender and tell them that you are making a very generous offer, and if they refuse, then they will be left with nothing. In fact, if you are eligible to discharge the entire debt through bankruptcy, then you may want to offer them less than $16,000. If you negotiate a settlement, get the agreement in writing before you pay and hold onto the paperwork, in case you need to prove the debt is satisfied.
      0 Votes

  • 35x35
    Nov, 2011
    Jeanny
    Hi Bill, I recently looked at my credit report and it displayed my first mortgage Ocwen as foreclosed but my second mortgage Wells Fargo Account charged off. $52,107 written off. $4,249 past due as of Nov 2011. The condo foreclosure feb 2011. Would I still owe them anything to Wells Fargo? I bought me condo at the age for 20 for 274,000 when it foreclosed it was worth 79,000. The realtor got me a huge loan and made my mortgage adjustable. Would I be able to fight this because I only made about 24000 yearly and they approved for such a big loan? My loan company shouldn't of approved me, can I do anything to fight this. It was the home I lived in for 5 years and then the mortgage went adjustable and I'm located in California. I now can afford a home but can't buy how long before I can purchase. My credit is 630 now but it use to be 750 or higher. Thanks, Jeanette
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Your best course is to speak with an attorney. You can discuss whether you were the victim of predatory lending (and it appears to me that you were) and whether you can take action to remedy the situation after so much time has passed. If you can't invalidate the underlying claim against you, then you could very well be on the hook for the deficiency balance owed to Wells Fargo (and your first mortgage holder, too). When you speak with the attorney, bring all the paperwork you have regarding your loan and any communications you received from the lenders and see if your loan is a recourse loan or a non-recourse loan and find out what the anti-deficiency laws are in your state.
      0 Votes

  • 35x35
    Nov, 2011
    Troy
    I live in GA and I foreclosed on my home in Jan 2010. My home Wells Fargo equity line was charged off and recently (Nov 2011) my bank exercised it's right of settoff and debited money from my personal checking account. If I close my checking account and open a new account with a different banking institution what other recourse does Wells Fargo have to collect money on the charged off loan? Can they garnish wages?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Wells Fargo cannot garnish your income or levy a bank account without a court order. As you noted, funds you held in a Wells Fargo account did not need a levy, as the right of offset gave Wells the authority to reach into other Wells Fargo accounts you possessed.

      Wells Fargo can choose to sue you, to obtain a judgment that would give it the ability to garnish wages and come after assets, consistent with the governing collection laws (very likely the ones in GA).
      0 Votes

  • 35x35
    Nov, 2011
    Shannon
    My first mortgage is a VA loan was modified under HAMP with Chase. The modification took several months but had a successful outcome. I also have a second mortgage which was 125% LTV with GMAC. I was behind in payments on the second. While I was waiting on the modification of the first I received a Fedex letter from GMAC offering a payment reduction. I signed the agreement and mailed in my new payment. A couple of months later I received another letter from GMAC offering a even lower payment. Again, I signed the acceptance and mailed a check. A month later I received a settlement offer from GMAC in the amount of $3900 (10% of the loan). They wanted me to send a cashiers check if I accepted their terms. During this entire process of new lower payments and the settlement offer, I tried to reach the individual in GMAC's Loss Mitigation Department who sent each of the correspondences. I left messages (when the voicemail wasn't full), I tried to reach other individuals, etc. Never was I able to reach anyone at GMAC. I borrowed funds from a relative but was afraid to send in the cashiers check for the settlement with fear it would end up like the past two payment reductions. The next thing I know I receive a letter from an investment firm who bought the note pennies on the dollar and GMAC charged it off! An assignment was never made so I didn't pay this firm anything. They then sold it to a private company that specializes in the Acquisition, Management and Liquidation of defaulted residential mortgages. They specialize in second mortgages. Public records show that GMAC assigned the deed to this private company a few days ago. They have called threatening. I'm current on the first mortgage and upside down. I plan to call them but I wanted advice on how I should proceed with this new firm. Can they actually foreclose? If GMAC charged off the loan and then assigned the deed over, I'm I obligated to pay anything to GMAC or do I pay the new lien holder. They of course bought the note for pennies on the dollar. Any advice that you can offer is very much appreciated!
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Charge off means nothing to consumers. It is an accounting phrase that means the creditor moved the account from its current accounts book to the bad-debt line on its general ledger. Charge off does not change the legal rights of the creditor or debtor. A creditor may sell or assign a collection account to a collection agent, and the collection agent has the same rights to collect that the original creditor did when it owned the account. Here, this means the collection agent who owns the collection account can foreclose.

      My advice? Consult with a lawyer who has contract litigation or real property experience to help you negotiate a fair settlement to the collection account.
      0 Votes

  • 35x35
    Nov, 2011
    Stacey
    In 2007 I purchased a home with a 1st and 2nd through BOA. Due to the real estate blow up in 2008 I lost 70% of my income so in July 2009 I ended up filing a chapter 7 BK. I reafirmed my current 1st mortgage but not my 2nd. In April 2010 I was finally able to get a loan modification for my current 1st.(current since my modification) I have been trying to modify my current 2nd but am not having much luck. I am now 31 mo behind and 22,000 in payments. It seems as though BOA wants to do nothing to help. I am torn of what to do since I currently owe more on my 1st then my house is even worth but I still have a 2nd for 102,000+ 22,000 in back payments. I don't want to move but don't have 22,000 to catch up the payments let alone don't want to owe 130,000 more on my house then it is worth. If they forclose on my home there won't even be enough to pay off my 1st. Any advise of what to do with my 2nd?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      If home loans are discharged in a chapter 7, and the home owner does not reaffirm the loans, the discharge strips the homeowner's personal liability for the loans. This means that the homeowner can walk away from the property, allow a foreclosure, and have no personal liability for any deficiency balance.

      Here, you reaffirmed the senior home loan, which reinstated your personal liability for this loan. Whatever you do, do not reaffirm any debt discharged in bankruptcy without consulting a lawyer so that you are aware of the usually non-existent pros and significant cons of reaffirmation. You mentioned you did not reaffirm the junior loan, which gives you considerable leverage when negotiating with the mortgage servicer or collection agent the mortgage servicer sold the collection account to.

      Basically, the collection account for the junior is worthless if you are willing to walk away from the property in a strategic default. Is the mortgage servicer or collection agent for the junior pursuing you for the balance? If so, and you cannot negotiate a settlement, then quit the property. If the mortgage servicer or collection agent for the junior is not pursuing you, then stop pestering the servicer or collection agent to negotiate a settlement it does not believe it can collect.
      0 Votes

  • 35x35
    Oct, 2011
    Jennifer
    I defaulted on 1st & 2nd on 9/07. The home was foreclosed on by the 1st officially on 9/1/09, but the 2nd had written off their balance in 2007. The bank I had my 2nd with now no longer exists and was purchased by another bank, who has, after 4 years, sent me to collections for $150k. This was a Georgia home, primary residence, and Georgia is one of only a few quick claim states that only allowes the 1st 30 days to pursue legal recourse on any amount lost, so their term has come and gone long ago... (My understanding). Can the 2nd now come after me all of these year later?? And if the 1st rights to pursue me ended 2 years, ago how can the 2nd do that? Further, the write off was completed long before National City Bank was purchased by PNC Bank, so can PNC pursue me when I never had an account with them?
    1 Votes

    • 35x35
      Oct, 2011
      Bill
      The balance owed a lender after a foreclosure or short sale is called a deficiency balance. Some state legislatures wrote rules to outlaw the collection of deficiency balances. These are called anti-deficiency or no-recourse rules. You mentioned Georgia. As I understand the Official Code of Georgia Title 44, Ch. 14, a deficiency lawsuit must be court-approved within 30 days of a the property's sale.

      Consult with a Georgia lawyer who has experience in real property law. He or she will make a more precise analysis of your situation, and will advise you accordingly.
      0 Votes

    • 35x35
      Nov, 2011
      Jennifer
      Thanks Bill. The 30-day clause apparently only applies to the first lien holder, not the second. According to the lawyer I spoke to, the banks are pursuing consumers under the 6-year statue of limitations on contracts under the guise that this is a contract breech. So, any direction how to address this is greatly appreciated!!
      0 Votes

    • 35x35
      Nov, 2011
      Bill
      Thank you for the clarification regarding the 30-day rule. Return to the lawyer you spoke to and ask about attacking the validity of the contract, which is the classic defense in a breach of contract case.
      0 Votes

  • 35x35
    Oct, 2011
    Clara
    We have 1st and 2nd mortgage 80/20 with different banks. We owe $293,000 on the 1st and 87,000 on the 2nd. Our house is worth approximately $252,000-$275,000. We are current on both mortgages and never have been late. However, as you can see, we are completely underwater on the 2nd, and would like to start the path to debt settlement for this simple fact. We're uncomfortable with the thought of defaulting on that loan, but are prepared to do so. We understand the credit score ramifications and the threat of foreclosure. Do you think we should pursue? And if so, what are the odds that the lender would actually seek foreclosure vs. settlement based on the fact that we owe the 1st more than 3 times the amount owed to them? Your thoughts are much appreciated.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      What is your goal? Are you trying to stay in the property? Do you wish to quit the property? If you want to stay, look at short refinance. If you want to quit the property, look at a short sale or strategic default.

      Update You should also look into the new HARP that will allow some underwater homeowners with loans backed by Fannie Mae and Freddie Mac to refinance at today's low rates.
      1 Votes

  • 35x35
    Oct, 2011
    Mel
    Hi I have a second mortgage on my home in the default amount of $33,000 That was sent to collections despite the face I was trying to get current. The home is not worth what both the primary and secondary mortgages total. The collection agency said I can make an offer to pay the debt. What percentage is reasonable for me to start. The primary was slightly modified and is current.both are with wells Fargo. Just need to know my options,as well as when is there asking to much and I should them file BK. The second was less than 180 past due when they sent it to collections. Thanks.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Start negotiations at 15 cents on the dollar.
      1 Votes

    • 35x35
      Jul, 2012
      toni
      We are in similar situation with W/F...has this been resolved for you? How did it turn out? Thanks.
      0 Votes

  • 35x35
    Oct, 2011
    Lis
    I allowed a foreclosure on my property in AZ last year. The first mortgage was written off and I didn't have to claim it as "income" on my tax return last year. The second mortgage (through the same lender, SLS) is still asking for payments. I know that AZ is non-recourse state - can they still seek to collect the balance? Additionally, I just received a settlement letter from SLS offering to reduce the 27K down to a one time payment of 8K (which, of course, I don't have). My question is this -- since the second mortgage was taken out to originally purchase the home, a) can they still seek to collect the debt, b) if they write it off, will I need to claim it as "income" for the next tax season and c) should I even consider the settlement since it is clearly outside of my price range? Any help would be great - I realize that I might need to contact a lawyer, but figured I would start here first.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      I realize this is not the point of your message, but your second sentence gives me pause. Just because a creditor writes-of/charges-off a debt does not mean the borrower has zero tax liability automatically. Perhaps what you wrote was not precisely the chain of events that transpired, but what you expressed is incorrect nevertheless. On to your questions.
      1. My understanding of Arizona's anti-deficiency law is incomplete, but based on my limited knowledge, Arizona anti-deficiency laws apply to second mortgages and deeds of trust if they are purchase money loans. Therefore, the lender may not pursue you in court for the deficiency balance.
      2. See the Bills.com resource Mortgage Forgiveness Debt Relief Act to learn how to avoid the forgiven income issue. Again, the lender writing-off or charging-off the debt has nothing to do with the borrower avoiding any tax liability.
      3. If you have no legal liability for the deficiency balance under Arizona law, and if the Mortgage Forgiveness Debt Relief Act applies, then you have no legal or tax reason to agree to a settlement.

      Consult with an Arizona lawyer who has experience with Arizona's anti-deficiency law to get more precise advice.

      0 Votes

  • 35x35
    Oct, 2011
    Wayne
    I live in CT and short sold an investment property was able to settle with the first mortgage (GMAC for $127,000) Owed Greentree $38,000. They got $9,000 in the short sell as a release of lien agreement, and now they want $30,000 from me. Their stance is The $9,000 didn't come out of my pocket it will not be considered as a part of a workout. 4 years of 13% interest and a $9,000 at short sell i would think that 5% to 10% of the $30,000 balance would be far. What would be a fair offer and should that $9,000 be considered as part of a %25 settlement of the entire loan?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Your debt is now unsecured. What the creditor will settle for in this kind of debt depends, at least in part, on what its options are.

      How quickly could Greentree expect to be repaid, were they to sue you and get a judgment against you? Do you have wages that could be garnished or assets, such as a bank account, that may be easy pickings? At what level? Do you have a lump sum to offer them?

      If you can demonstrate a financial hardship, start by offering them 15% of the debt. If you feel better starting at 10%, you can certainly start there. If you have the ability to discharge the debt via a Chapter 7 bankruptcy, then your leverage increases, even if you choose not to file. You may want to negotiate on your own or hire a debt settlement firm to negotiate on your behalf. If you choose that route, hire a firm that won't charge you a fee until after the debt is settled.
      0 Votes

  • 35x35
    Sep, 2011
    Tina
    I have a property that I had a 1st and 2nd mortgage on and the property went into foreclosure in 2006 but the 2nd mtg is still showing open and at a larger amount the orig...The property was sold. How do I get the 2nd mtg removed from my credit report?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      You mentioned Indiana. Indiana's foreclosure laws are found in IC 32-29-7. Indiana offers very limited anti-deficiency laws, so it is likely but by no means certain that you have liability for any deficiency balance that resulted from your 2006 foreclosure. Therefore, I do not see means by which you can demand the second to remove the collection account notation from your credit report. Consider negotiating a pay for delete with the creditor that owns the collection account for the second.
      0 Votes

  • 35x35
    Sep, 2011
    Rafael
    I have a Lien on my home from an equity line (WaMu) which writes off the loan before they got bought by chase. I asked chase, they don't have any record of this loan. However, there is a collection agency that claims the debt. They said they are managing for chase. I don't know who I should negotiate and if the agency has legal authority to remove the Lien of My home after paying then. Rafael
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Your anecdote is a perfect example of an instance where a consumer should validate a debt.
      0 Votes

  • 35x35
    Sep, 2011
    Shahab
    My 2nd mortgage is settling for a certain amount. But in their letter they say that the account would be based on that amount and they do not say anything about them releasing the lien on the property. They said by law if they say that they settle that account for a certain amount, once the money is recieved they will have to release the lien within a certain time. Is this correct?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I am reluctant to offer an opinion on a settlement agreement I have not read. Bring the offer to a lawyer who has consumer law, contracts, or real property experience. He or she will review the offer and give you guidance tailored to your situation.
      0 Votes

  • 35x35
    Sep, 2011
    Adriana
    I foreclosed in 2008... My 2nd is coming after me threw a 3rd party collection. Can they do this ???? I know if worst comes to worst I will File BK on the Judgment
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Yes, it is possible for this kind of debt to fall into collections. In addition to speaking with a bankruptcy attorney, look into the statute of limitations for the debt.

      Which lender initiated the foreclosure may have some bearing on your situation. It may be worthwhile for you to investigate whether the lender gave up its right to collect on the debt by waiting so long to try to collect. In some jurisdictions, there are restrictions governing how long a mortgage debt deficiency balance that results from foreclosure can be pursued.
      0 Votes

  • 35x35
    Sep, 2011
    Merry
    I have a first and second mortgage. I'm current on my first I still owe $157k. I haven't paid on my second in 6 months I owe 62k. My second is with a FifthThird bank. I was current on second until my salary was reduced. They are call me everyday saying that my account will go into forclosure. Is this true. Can they forclose when they are second on the mortgage. Can they force me out and I have to pay my primary mortgage and my second. They also stated I will be taken to court and my salary will be garnished. Is all this possible. What can I do. I don't have the money to pay the second. I struggle to pay my primary, but it is paid. I asked to settle the second mortgage but they only agreed to 44k which I don't have. Are they blowing smoke or should I start looking for an apartment?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Please see the Bills.com resource Can a Second Mortgage Holder Foreclose? for a discussion of the main issue in your comment. Ask any follow-up questions you may have on that page.
      0 Votes

  • 35x35
    Sep, 2011
    Ken
    I just had my Chapt. 7 discharged. I didn't file on my home. I owe $175,000 on the 1st and $73,000 on the 2nd and the house is worth around $180,000. I have never missed a payment on the 1st but the bank stopped the automatic payment deduction for the 2nd during my BK. I sent them a letter saying that I planned to continue paying the second but they told me that it had been discharged. It has been a struggle just to get a payment statement out of them almost like they don't want me to pay on it again. By the way Well's Fargo holds both the 1st and 2nd. I know that there must be a lien on the house and that they probably won't try to foreclose since with the 2 I am upside down. If the housing market comes back in the future can they then come after the house? Does this discharged debt continue to build on itself thru penalties and interest? Or does it just stay at the original amount discharged? What are my options when dealing with the bank? Would they settle the 2nd for a lesser amount to completely get rid of it from the books? Would they be willing to combine the 1st and 2nd into one 30 year fixed mortgage at the current rates? Even though combined they are even worse upside down. Is it better to try to deal with the bank or wait until it goes to a collection agency? What kind of deal might they do on a $73,000 2nd? Is under $10,000 too much to hope for and if so does the difference show up as a 1099 for taxes.I thought that once the BK was done I would just continue making my payments like before but now it is a mess.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      You and your bankruptcy lawyer need an hour or so together to discuss the details of your bankruptcy, what was discharged, and your risky contacts with Wells Fargo regarding the junior home loan.

      Two items jump out at me in your message. First, all assets and liabilities must be included in a bankruptcy filing. You do not have the option to pick and choose which debts to include and which assets to hide. Therefore, your statement, "I didn't file on my home," cannot be true. If your bankruptcy filing was accurate and complete, then both of your home loans and the home itself was included in your filing. Second, in some jurisdictions and in some circumstances, a junior mortgage can be discharged completely in a bankruptcy. Your continued contacts with Wells Fargo regarding the junior may cause the junior to be reinstated, which is exactly what you do not want to happen.

      As I mentioned, consult with your bankruptcy lawyer to learn more about your discharge order and what it means to you. For a general discussion of bankruptcy, see the Bills.com bankruptcy section, which contains extensive information about Chapter 7 and Chapter 13 bankruptcies.
      0 Votes

  • 35x35
    Aug, 2011
    Diana
    Hi, I am very confused-I received a loan modification equal to what my home is worth now. We sent in the check with the new Deed of Trust a week and a half ago. I received a call from Flagstar Bank that they charged off the 2nd and I need to contact SRG Collection Co. Is this a "bait and switch" kind of thing? They get us all sugared up and then drop the bomb on us? Shouldn't they have sent us a letter letting us know or a recorded document of some kind? I called and asked when they sent the letter and I got everything from May to I don't see any notes in your file to call SRG we no longer have your file. I don't feel this is right and I don't feel comfortable not having something in writing from Flagstar Bank that this is a legit company to contact-what do you think?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I think you should have an attorney review your loan modification paperwork and all the correspondence you have between you and the lender. If Flagstar held both the first and the second, had you discussed with them what would happen to the second, when the first was modified? Was your second mortgage a purchase money loan? What state do you live in?

      Discuss all these items with an attorney, to see what options you have.
      0 Votes

    • 35x35
      Aug, 2011
      Diana
      Thank you for your response-I live in So. Cal. I still do not feel it is right that a lender can offer a modification when they also hold the 2nd loan and do not address it. I don't think we would have agreed to the modification because they said "Hay here you go...a new rate of 4% etc., etc..." but by the way on the back end you STILL owe the 2nd with a collection company. REALLY...It will be still difficult to pay the 1st since I am looking for a job, but they still approved it with me not having a job yet! I am looking for an Assignment of Deed of Trust to the collection co. or a Full Reconveyance-and you should TOO if you are in my possition. I was NEVER given a letter of assignment or a "Good Bye Letter" as they call it to another company. They modified my loan and then LATER told me to call the collection company regarding the 2nd loan-NOT COOL! I am not mad at you, I am just mad that they mad us happy and then dropped the bomb after we sent them the first payment and new Deed of Trust. REALLY thank you again for this blog-I know it is helping a lot of people like me. God Bless You!
      0 Votes

  • 35x35
    Aug, 2011
    RobB
    This article is not accurate. A lender foreclosing on a second mortgage can only be done if the lender pays off the first! Second leins are just that, second. This will likely not occur. Call the second mortgage holder and work out a "reduced" modification. If you owe $40K, offer them 8K to settle. They will take it, otherwise they risk not getting nothing....
    1 Votes

  • 35x35
    Aug, 2011
    Tami
    Hi! My home went through foreclosure in 2008 when I couldn't get either my first or second loan holder to work with me on a modification. In 2009, the 2nd mortgage was marked as a charge-off. In Jan. 2011 I received a 1099C from Litton for the original loan amount that I defaulted on, now I'm in the process of trying to purchase a home again and my credit report shows an open account from Litton for a much inflated value that is showing late. Can they file a 1099C on my original loan and then open a new one without my signature or consent? Is that legal? Thanks!
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I don't believe that Litton can misreport the size of your loan. It should also not show as an open account, but as a charged-off account. Have you tried disputing the item, by first contacting Litton and then the credit bureaus?

      Separately, make sure to speak to a tax professional about the 1099C, so you can properly account for it on your 2011 return that is due in 2012.
      0 Votes

  • 35x35
    Aug, 2011
    maggie
    Hello - Our home was sold in a foreclosure sale on July 8th. We lost 180,000 on the home. Our HELOC is with Chase bank and is $18,000. We have stopped paying on the HELOC as we can't afford the debt. How do we negotiate with them to settle? We are currently 40 days behind on payment. We want to settle. Thank you for your time.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      A settlement is a negotiation. You contact them and make an offer. Don't offer more than you can afford to pay.

      You may want to hire a debt settlement firm. Especially now that you don't pay them anything, until after the debt is settled, it may be a great option. That way, a professional negotiator is handling your negotiations.
      0 Votes

    • 35x35
      Aug, 2011
      maggie
      Thank you. Do I work with the loss mitigation department or with the person who makes the collections calls? Also do I write a letter and detail the debt owed and insolvency? Thanks much for your help.
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      I think that you can speak with whomever contacts you. Ask them if they can handle settlement negotiations or if you need to speak with the loss mitigation department.

      I don't think you need to write a letter, but gather the facts that demonstrate a financial hardship and be prepared to share them.
      0 Votes

  • 35x35
    Aug, 2011
    Caty
    Bill, I recently found out that my 38K second mortgage with Litton has been reported as a charge-off to the credit reporting agencies. I called and negotiated a settlement with them for $3500 and a change in account status to "account settled" as indicated in the settlement letter they sent to me. I think this is a great offer and I do beleive that I qualify for the Mortgage Forgiveness Debt Relief Act for the additional income that will be reported to the IRS. I was in the process of counteroffering that in addition to the change in status reported to the credit bureaus, that the reporting also reflect a ZERO balance. My question is, that at this point should I "rock the boat" and try to counteroffer with a Pay for Delete indicating that I want the debt to be completely removed from my credit report or should I just accept the settlement with the counter of the zero balance with "account settled?" I don't want to make it worse for myself, but I feel as if I may have an upperhand at this point. Thanks.
    1 Votes

    • 35x35
      Aug, 2011
      Bill
      I don't see a big risk in asking for a pay for delete. The creditor may not grant your request, but I think it unlikely that the settlement offer you received will be revoked.
      0 Votes

  • 35x35
    Aug, 2011
    Brian
    1st mortgage and HELOC on my primary residence. I have owned the home since 2004. Both 1st mortgage and HELOC were included in a Chapter 7 Bankruptcy and a discharge was received in early 2010. I did not reaffirm the 1st mortgage or the HELOC. The value of my home is ~$178,000. This is ~$12,000 less than the combined total of the 1st mortgage and the HELOC. I owe ~#31,500 on the HELOC. I continue to make payments on the 1st mortgage (never late) and the HELOC (got a payment or two behind in the Dec 2010 - Feb 2011 time frame). I called the HELOC to get the monthly payment amount and the amount needed to get the debt caught up. The HELOC company tells me the HELOC has been charged off so they can't tell me what the current monthly payment is because they are showing a $0.00 balance. What are my options at this point? What can the HELOC company do to me or my primary residence? I don't want to lose the house.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If the mortgage servicer for your HELOC cannot tell you what happened to your loan, then I cannot either. The fact that the owner of the HELOC charged off the loan does not mean it disappeared. What did disappear is your liability for the loan, but if you want to continue to own the property, you need to pay your mortgages.

      My guess — note that word choice — is that because the market value of the property is less than the balances of the loans, the HELOC owner decided to cut its losses by writing off your account, and is now in the process of selling it to a collection agent. If my guess is right, you will hear from a collection agent in six months or so. Negotiate a lump-sum settlement with the collection agent for pennies on the dollar, and be sure the collection agent records the settlement so that this encumbrance is lifted from the property.
      0 Votes

    • 35x35
      Sep, 2011
      john
      if the heloc was inluded in the bankrupotcy ,bills.com is wrong they are done for their dischraged they cnat sell a disacharged debt to a collections agnecy hahahaha good luck on that youll be fine
      0 Votes

    • 35x35
      Sep, 2011
      Bill
      Personal liability for a home loan (be it a first mortgage, HELOC, or something else) may be discharged in a bankruptcy, but the property is, in most jurisdictions, still encumbered by the mortgage or deed of trust. In some jurisdictions, the lien may be stripped on a junior loan.

      I know of no restriction on the selling or assigning a collection account of a debt discharged by bankruptcy.
      0 Votes

  • 35x35
    Jun, 2011
    David
    I am current on my 1st and 2nd loan but have over 24% negative equity. The 1st loan is underwater as well. I can and want to settle on my 2nd to reduce my negative equity, but loan counselors tell me I need to stop payments to increase my negotiation strength. I can afford payments, I just can't stand the fact that I could buy the same house today and pay 1/2 my current mortgage payment. What should I do to help reduce my negative equity and negotiate for a settlement on my 2nd mortgage?
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Break down the problem into two manageable pieces. First, tackle the second by negotiating a settlement. Then, do a short refinance on the first. Ask any follow-up questions you may have on the appropriate page.
      0 Votes

    • 35x35
      Jun, 2011
      David
      Thanks for the quick reply! What do I need to do to negotiate a settlement on the 2nd? Should I fall behind in payments first? I tried calling BofA and they of course said they do not take any settlement offers and recommend I short sale. I want to stay in the home. Also, how can I refinance the first if it is underwater? BofA said they do not have any refinance/modification programs for loans with negative equity (its not an FHA-owned loan).
      0 Votes

    • 35x35
      Jun, 2011
      Bill
      I mentioned two links in my earlier reply that I think will help answer your questions.

      The tough issue in negotiating with a party unwilling to negotiate. Regarding your situation, the mortgage servicer is unwilling to negotiate a settlement because you are current in your payments. When you call your servicer today, you are forwarded to the current accounts call center where the employees sit at workstations displaying scripts they read. In this call center, the messages customers hear are, "Your payment is a bit late, when can you send it?" and "We do not offer settlements, when can you send your payment?" and so forth, always with the suffix, "...when can you send your payment?" If you are late with your payment long enough, your account goes to a different call center where the scripts are different and the customer service representatives have more flexibility. The second-line call center may be able to offer you a settlement, or if not, the third-line call center will.

      This suggests that the only way to negotiate a settlement on a second mortgage is to default on payments. However, this is inherently risky because the lender has the legal right to foreclose.
      1 Votes

    • 35x35
      Jul, 2011
      Sriya
      Hi Our first mortgage with chase was modified to 40 year fixed at 4 percent for 935k. Our second with PNC bank is at 7.5 percent for 180k. We got the home for 1.25 million and is now at 940k county records. We are planning to stop payments for the second since they refused to modify. My wife lost her job and I earn around 150k per anum. We have minimal funds to negotiate up to 20 - 30 percent of the second loan if they charge off. Are there any other risks involved in doing so. Can they initiate a short sale or foreclosure or come after my job in future. Please help. We are planning to work with homeliest to negotiate with PNC. Thanks in advance.
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      It is possible for the second mortgage holder to initiate foreclosure. You can offer a settlement, which, given the current property value may be acceptable. On the other hand, the lender could sue you for what you owe, which could lead to a wage garnishment.

      County records are not a good basis for estimating your properties value. I think you should do more research on what your home would sell for in today's market, as that is a key component to any decision you or lender makes.

      I advise you to speak with an attorney, to better understand the risks and possible consequences of defaulting on your loan, before you choose to do so.
      0 Votes

  • 35x35
    Jun, 2011
    Dee
    I live in California and I have 1st & 2nd mortgage from Chase. 1st is for 480k and 2nd is for 110k, home is now worth less than 460k at best. My husband lost his job and we couldn't make the mortgage payments. After first 6 months of no payments the 2nd mortgage was "charged off" and sold to a collection agency. After a year and a half, Chase modified 1st loan. Chase stated that they do not participate in HAMP and that they have their version of it which is what the terms they gave me. With interest and escrow 1st loan balance is 511k and the terms are 1-5 years at 2.625%interest, 6th year 3.625%, and 7-25 at 4.5%. When I filled out Loan Mod Application I listed both loans, this loan mod agreement doesn't mention the charged off 2nd loan. I called Chase and very helpful representative (I know shocking) told me to not mention the second loan and that I got a good deal. If we still have to pay 2nd loan then the total balance is not a reasonable investment and we'd rather walk away. I am unsure what to do with the collection agency--can I just sign the Loan Mod Agmt and ignore the second loan? Any help you can give me is greatly appreciated.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Three possible outcomes await you for the second.
      1. The mortgage servicer or the collection agent that buys the second will pursue you with all legal guns blazing, resulting in a foreclosure. This makes zero sense economically because the value of the property is less than the sum of the balances of the loans. Nevertheless, the second pursuing foreclosure is a legal possibility but financial lunacy.
      2. The mortgage servicer sells the mortgage to a collection agent that pursues you using a softer approach, and attempts to negotiate a settlement on the second for a small fraction of the balance due. This makes the most sense economically.
      3. The mortgage servicer throws up its hands and writes-off the mortgage and issues a 1099-C. This is less likely than No. 2, but a possibility.

      Regarding signing the modification, ask a lawyer who has real property or contract law experience to review the document before you execute it. Ask him or her to explain sections of the contract you do not understand.

      0 Votes

    • 35x35
      Aug, 2011
      heath
      I am in a similar situation. My 1st was modifed by Chase and I was told my second was charged off. The problem is has been over one year and haven't heard from anyone on the 2nd. I can't imagine it just went away.
      0 Votes

  • 35x35
    Jun, 2011
    Jeff
    Hi, I'm in California and I'm attempting to loan mod. I have just submitted my request to the 1st mortgage lender and waiting to hear back. Meanwhile, the holder of my 2nd loan, a loan servicer, says that if I don't stay current on my payments that the loan will be charged-off and that this could become a major obstacle to doing a short sale if I decide to pursue this option should I not get a loan mod. I'm not sure if I should continue making payments on the 2nd until I have a firm answer from the 1st lender about whether I can get a loan mod.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      The servicer for the second may have given you accurate or terribly inaccurate advice depending on your precise circumstances. Let me give you some background: In California, and almost certainly in other jurisdictions, where there are two deeds of trust (or mortgages) on a property, one is senior (the first) and the other(s) is/are junior. The order is determined by time. The earliest deed of trust has priority over subsequent deeds of trust.

      Now let us take the example of a homeowner with two deeds of trust on their property. Homeowner wants to refinance their senior. Homeowner finds a refinance loan, which is used to pay-off the old senior. However, at the moment the old senior is paid, the junior becomes the oldest loan and assumes the first position. Customarily, the homeowner and the refinance lender will approach the junior and say, "Please sign this subordinate deed of trust contract, whereby you agree to re-assume the second position." If payments on the second are current, the second will almost certainly agree to a subordination agreement. However, if the payments are delinquent, the mortgage servicer for the second would be foolish to relinquish their new-found first position.

      Here is the tricky part of your question. Is the loan modification a refinance or a renegotiation of the loan terms with the exact same parties? If the modification is a new loan, then it is, in effect, a refinance and the lenders will reshuffle their positions absent a subordination. If the modification is an amendment to the existing loan, then the senior remains in the senior position and the positions do not change.

      I cannot tell you what will happen when you renegotiate your senior, and if there is change to the rate and term, how it will be structured exactly. Your safest course of action is to stay in the good graces of your junior should you need to ask for a subordination.
      0 Votes

  • 35x35
    Jun, 2011
    CJ
    I have an investment property and when the economy crashed and I could not make the payments because my tenants could not find work, I stopped paying on it. The property was supposed to be foreclosed on in Jan 2010. But I found out in Nov 2010 that it never went to sheriff sale and therefore the property was still in my name. I was going to do a modification by never did. Recently I got a 1099 saying they had forgiven the 1st mortgage debt of $51,250 with a fair market value of $12,000 on 12/31/2010. I have a 2nd mortgage is about $12,000 and I had stopped paying on it when I thought the property was being foreclosed. I did contact them to make payment arraignments and made one payment to bring it current. Currently I owe about $2000 to bring it current. My questions: 1) Do I still own the property? 2) How will the 1099 affect my 2010 taxes? I got the 1099 after I had filed already 3) Should I get current on the 2nd or try to settle it? I read that I might can settle the loan for 10%-20%. 4) Can the 2nd foreclose on the property?
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      I will attempt to answer your questions.
      1. My powers of legal perception are limited. If you do not know if you own the property, I do not either. Consult with a lawyer in your state who has experience in property law. He or she will review the records at the county clerk's office to learn the status of the property
      2. Regarding your taxes, given that the property was a rental, you do not qualify for the Mortgage Forgiveness Debt Relief Act. You need to complete a Form 982 when you file your tax return. Consult with a tax preparation specialist or tax attorney to learn if you need to file an amended return.
      3. Settle the second. As you suggested, you may be able to settle the debt for a fraction of it's face value.
      4. The second has a legal right to foreclose. However, it may choose not to if the economics make no sense.
      0 Votes

  • 35x35
    Jun, 2011
    Peach
    When you call Citimortgage make sure you document the time you call and get the agents ID number. If you have a device to record them make sure you do this too. My home was placed in foreclosure and I was told by the lawyers that were hired by Citi If I'd not been so savvy and knew how to document I'd lost my home. Now I'm doing the short sale and it's a nightmare, but of course I've already filled up a notebook of documents of the conversations to cover my back. BEWARE OF ASHELY LESTER WITH NATIONAL QUICK SALE! This is a third-party company that is helping Citi with these short sales. She is not on your side BEWARE OF NATIONAL QUICK SALE they are not trying to help you. I put $3,000.00 into my house to help sell it and she went behind my back and dropped the price from 98,000.00 to 31,500.00 with my signature. The Realtor was in total shock he said, I can't believe she did that.. of course I have her recorded and a e-mail trial of all the WRONG things she did. Again BEWARE of this company.They had the nerve to ask me, "why are you so involved with this?" I said, Are you serious?, I work for a bank also I know what you are doing is wrong. She said, Well we aren't use to the homeowner being so involved. Nuff said. BEWARE!
    0 Votes

  • 35x35
    Jun, 2011
    Dee
    Hi, My home was foreclosed on in 2008. We had a 1st and 2nd mortgage from the same bank to purchase our second home in Delaware. The 1st mortgage was foreclosed on and the 2nd mortgage is still on our credit report as open. Can you tell us if we should file bankruptcy. We didn't realize that WF could still come after us for the 2nd mortgage. Any help would be appreciated.
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Delaware is a recourse state. This means that a lender can come after a borrower in Delaware for an unpaid balance on a mortgage, if there is a short sale or a foreclosure.

      If the debt is large and you have other financial problems, it makes sense to consult with a bankruptcy attorney to see if you are eligible for a Chapter 7 bankruptcy that could wipe out your debts.

      Another option is to try to negotiate a settlement with your lender, offering to pay back only a percentage of what you owe.
      0 Votes

  • 35x35
    Jun, 2011
    Crystal
    My husband and I filed chapter 7 bankruptcy in 2008. We included everything in our bankruptcy, but reaffirmed our vehicle. At the time, we thought we had reaffirmed our 1st & 2nd mortgages as well. As it turns out, we didn't. But we have been in our house, making payments this whole time. We recently have had a substantial decline of income, and are falling behind on our mortgages. But we do not technically have a contract with either the 1st or 2nd mortgages. Our 2nd mortgage is stating that they are going to move the account into "charged-off" status at the end of the month if we are not caught up. I know that "charged-off" does not mean that the debt is forgiven. But it was included in the bankruptcy, so therefore doesn't that mean that they cannot come after us for the debt? They can however, come after the house. But our house is not worth what we owe on the 1st & 2nd mortgages. It is worth slightly over what we owe on the 1st. So if we stay current on our 1st, will the 2nd mortgage foreclose? If they don't now, will they ten years from now if/when we have equity? What would we have to do to stay in the house now?
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      Confirm what I write here with your bankruptcy lawyer:
      1. If senior and junior mortgages were discharged in a chapter 7 and were not reaffirmed, then the homeowner no longer has personal liability for the notes. This means if there is a foreclosure, the homeowner can walk away from the property without recourse by the mortgagees. The rights of the mortgagees to repossess the property are unchanged by a bankruptcy.
      2. If you continue to pay the senior and stop paying the junior (the second), the junior has the legal right to foreclose. However, if you are correct that the market value is at about the same as the balance of the senior, then it make no economic sense for the junior to foreclose. It makes more sense for the junior to try to negotiate a lump-sum settlement of the debt. It is impossible for an outsider to know what criteria mortgage servicers use to decide whether to foreclose, negotiate in earnest, or sit on their rights.
      3. It is certainly possible, from a legal perspective, for the junior to sit on their rights. However, the mortgage servicer for the second represents an investor, and the investor is probably unwilling to wait for an unknown period of time. It will want to be paid in full, or paid a settlement so that it can move on.
      4. One course of action open to you is to stop paying the second, and save as much money as you can. At some point in the near future, say 6 or 9 months from now (although that's a guess) the junior will either contact you about settling the debt, or sell the collection account to a collection agent. At that point, you can start negotiating a lump-sum settlement.

      Please return here to tell us your decision and how your negotiations progress.

      0 Votes

  • 35x35
    Feb, 2011
    Jason
    I have delinquent second mortgage on my primary residence and was wondering if the collection agency has the authority to access funds that reside in a bank account for an LLC we setup long before we had financial issues (the LLC was setup as a sole proprietor)?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      It is unclear to me what liability you or your LLC may have. It takes more than printing and signing incorporation papers to set up a corporation properly. Therefore, I urge you to consult with an lawyer who has experience in setting up business organization to learn what liability you or the LLC may have. If you used a lawyer to set up the LLC, now is the time to return to him or her to discuss the LLC's liability, if any.
      0 Votes

    • 35x35
      Mar, 2011
      Sue
      I have a unique one. My 2nd was charged off prior to foreslosure and sold to a collection co. The home then foreclosed and the collection co is still seeking the balance or settlement. How can they if the collateral was siezed? I could not pay the settlement they were asking so they asked for payments, but I was told making a payment insinuates that I "owe" them the amount. This loan isn't even being reported against my credit anymore. I have tried to contact two separate attorneys in my area but have not heard back and am getting worried.
      0 Votes

    • 35x35
      Mar, 2011
      Bill
      Unfortunately, your situation is not unique.

      A mortgage consists of two documents: a note (or bond); and the mortgage itself. We call a mortgage and note a mortgage for the sake of convenience.

      The note is the buyer’s personal promise to make the repayments. If there is a foreclosure against the property and the foreclosure sale does not yield enough to cover the outstanding mortgage debt, the note serves as the basis for a deficiency judgment against the borrower for the balance still due.

      The mortgage itself is a document that gives the lender the right to have the property sold to repay the loan if the borrower defaults. Since the mortgage in effect gives the mortgagee (the lender) an interest in the land, the mortgage is recorded at the county clerk's office.

      The mortgage may still be attached to the property, but the note is what gives the creditor the legal ability to collect the debt from you.
      0 Votes

    • 35x35
      May, 2011
      Melissa
      My second mortgage was transferred/sold at least 5 times. Last mortgage company was The Sussex Group(Las Vegas), I was making payments(last on 3/31/2010) but then I heard nothing from them. Then in my credit report I saw that Allied Collection Services, INC(Las Vegas) have my debt since 09/2010. But on 3/2011 I received letter from United One Equities,LLC(Las Vegas) that they transfer servicing rights from The Sussex Group but I don't see them in my credit report only Allied Collection Services, INC is in it. Question: Should I pay collections company or new loan servicer? What documents should I ask them provide to make sure they have my mortgage? Thank You
      0 Votes

    • 35x35
      May, 2011
      Bill
      Validate the debt. The link I just shared explains what level of proof may be required.
      0 Votes

    • 35x35
      May, 2011
      Stephenia
      I have received a cancellation of debt from my first mortgage and the second mortgage is due to be stripped at the end of the Chapter 13 bankruptcy in 2015. Does the second mortgagor (now Real Time Resolutions) still have a lien against my home until mortgage is stripped?
      0 Votes

    • 35x35
      May, 2011
      Bill
      I can't give you legal advice, but will share my opinion. It is my understanding that the lien from your second mortgage is still present, until the lien is stripped. If you are working with an attorney on your bankruptcy, please verify this with your attorney.
      0 Votes

  • 35x35
    Jan, 2011
    Mia
    I just received a letter from a third party collections agency that they are attempting to collect the 100k balance that is owed on a home equity loan to Chase. The home has been foreclosed on a while ago, I have not heard from the 1st mortgage bank but now this. I live in Arizona and have no idea what can happen to me.
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Once the debt is no longer secured by your home, it becomes an unsecured debt. The collections agency can pursue collections against you. They can sue you and try to get a judgment against you that can be enforced by a wage garnishment, a bank levy, and by filing a lien. I think that you have two main options. The first is to try to negotiate a reduced-balance settlement with the collection agency. The other option is to speak to a bankruptcy attorney to see if you are eligible to discharge debts in a Chapter 7 bankruptcy.

      You stated that the foreclosure took place 'a while ago.' Unsecured debts are collectible for a limited time. How long it remains collectible depends on your state's statute of limitations. Make sure to look into the statute of limitations and do not pay a single penny before you know when the statute of limitations expires. Making any payment will re-start the clock on the statute.
      0 Votes

    • 35x35
      Apr, 2011
      Michael
      I have a HELOC that has been charged off for almost 3 years. I live in California. My HELOC is through a credit union that has accounts with sub accounts. For example my HELOC, Visa and car payment all have the same account number, but each have a sub account. I have kept my visa current even though it is closed. Would these payments be extending the statue of limitations on my HELOC?
      0 Votes

    • 35x35
      Apr, 2011
      Bill
      I am not a California judge (or a judge in any other state, for that matter) so my opinion is meaningless. That said, I think it would be a tremendous stretch for the credit union to claim that your activities on a related (but not the same) account would be enough to be considered account activity, and would therefore continually reset the statute of limitations.
      0 Votes

  • 35x35
    Jan, 2011
    Shelly
    We have two mortgages with Chase. Back in 2009 we got behind on our payments on both loans but have become current on our first mortgage since than. We were paying $4000.00 a month on our first loan and at the same time we were paying the regular monthly payment on the second mortgage. After we had gotten caught up and current on the first we spoke with Chase about getting caught up on the second mortgage and were told to pay a certain amount for the next four months. We paid three payments and were trying to pay the last payment (which would have made us current) when we were told that they could not accept our payment because it had been charged off. We are confused about this because there has been a payment made on this loan every month for the last 10 months. Even one of the guys who collects for Chase said he didn't understand why it had been charged off because they had accepted our payment from the previous month. Our question is where do we stand and what can we do?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      Unfortunately, mortgage servicers such as Citi still have not put the systems and sufficient personnel in place to handle the modifications, refinances, short sales, deeds in lieu of foreclosure, and foreclosures successfully. Your message is painful example of mortgage servicers' failures. What is especially sad here is you are struggling back to current status, and now you risk losing your home, Citi risking losing a customer, the investor risks losing the return on its investment, and Citi may bear the cost of a foreclosure, which while harm its own bottom line. A complete and pointless waste of money due to Citi's inefficiency.

      I have no sure-fire strategy or tactic to offer. My best (but my no means good) suggestion is that you hire a lawyer to file a quiet title action on the property. Doing so will involve the legal department at Citi. At some point before the trial, Citi's lawyers will ask your lawyer what you really want. Your lawyer can explain the situation, and perhaps Citi's legal team can break the logjam in the foreclosure department.

      I really wish I had a better suggestion, and I welcome readers who have experienced this mortgage servicer nonsense to relate their experiences in how they solved their messes.
      0 Votes

    • 35x35
      Jan, 2011
      Shelly
      Thank you for your quick reply. Hiring a lawyer is what my husband and I have been thinking about. When we spoke with the person at the bank who we are supposed to deal with now he told us we have two options. We could pay the balance in full or he would reduce it to roughly 80% of what we owe. We would have to come up with 25% by the end of this month. To me that is crazy because if we had the money to do that than we wouldn't have gotten behind in the first place.
      0 Votes

  • 35x35
    Jan, 2011
    Ray
    Here is my situation: On October of 2008 my wife and I filed for bankcruptcy which included both our home loans. We got our discharge letter on February 2009. Our lawyer told us we can just walk away from our home but if we want to stay we can make our monthly payments. Not wanting to leave we decided to make our payments. Last year we had fell behind on our second and third mortgage. We have not been late on our first mortgage. Our house is worth about 150k and our first mortgage is 215k our second mortgage is 54k and our 3rd is 42k. If we let our house go will we be able to buy a house since our bankcruptcy is going to be already 2 years or will we be affected because of the forclosure proceedings even if our loans where discharged through bancruptcy?
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      When you apply for a new mortgage, prospective lenders will judge you based on your debt-to-income level, your loan-to-value ratio (the size of the loan you want compared to the value of the property), and your credit. Your credit will be looked at for your credit scores and for any derogatory information on the report. Different lenders have different views of derogatory information. FHA loans generally require that the borrower not have a foreclosure or been issued a deed-in-lieu of foreclosure for the past 36 months. This is not a hard and fast rule. If a borrower can demonstrate a good payment history after the foreclosure and a reasonable explanation of why the foreclosure took place, the loan could be approved. Regarding a Chapter 7 bankruptcy, the bankruptcy must have been discharged for 24 months, before an FHA loan will be approved. Please be aware that the discharge date is not the filing date. The discharge takes place after the bankruptcy court ordered all debts included in the Chapter 7 bankruptcy to be liquidated and then issued a notice of discharge. A borrower can qualify for an FHA loan, even in the middle of a Chapter 13 bankruptcy! The payments to the bankruptcy trustee must be made as agreed for a one year period, the bankruptcy trustee must approve the loan payment, and the borrower must demonstrate job stability. It used to be the case that sub-prime borrowers had more options. Perhaps as the economy improves, lending requirements will become a bit less stringent, thereby expanding the options available to sub-prime borrowers.
      0 Votes

  • 35x35
    Dec, 2010
    Jeff
    "Our records indicate that this loan was charged off on February 27, 2009". The loan is for $98,000+. Long story-short... This was an investment property in CA Market went terribly bad and I went through a divorce Property went to forclosure and sold The second was charged off, w/ interest it's @ $98k What options do I have? I don't want to sit for 7 years. From what I have read I want a "settled as agreed" written statement? or "paid in full" statement? on letter head from the Aurora Loan Services. Require a 1099-C? Immediately? Is it true 5% negotiation settlement is an option? How...help...advice...please...
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      As the original answer tries to convey above, charge-off has accounting significance but no legal significance for the debtor. A 1099-C is issued when a creditor that is a financial institution cancels a debt exceeding $600. If the original creditor sold the collection account for the second mortgage or the second mortgage itself to a collection agent, the collection agent probably bought it for 15 cents on the dollar or less. (I have not learned what the market is among collection agents for charged-off second mortgages.) The collection agent has the right to collect the face value of the debt, but if you can negotiate a lump-sum settlement for approximately 15 cents on the dollar, both you and the collection agent will walk away from the negotiation happy.
      0 Votes

  • 35x35
    Dec, 2010
    Thank you in advance for taking the time to read this post! My parents bought a house in 2004 and have the first note with WF. They then were denied the second note from WF and so they went online to find a different lender. They were able to get the note with Irwin Equity out of California. They paid the note for 4 years but never made a dent in the principal since the interest was so high. Irwin Equity was bought by Green Tree and in the transition my parents stopped paying and were not contacted by any lender. Just recently have my parents been contacted by Green Tree saying that they need to pay the money or the house will foreclose. This is nearly two years later. My parents have requested debt portfolio and settlement plan but have not received it as of late. Secondly, my parents were able to qualify for the Make My Home Affordable on the first note. The banker who suggested this to them also stated that there was new stipulation passed in Iowa that those who qualified for this plan would be given a release of lien on the second note or something to that effect. Is there any truth to this? How far can Green Tree go to get their money?
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      I am unaware of any rule that requires a junior mortgagee to give a release on a lien if the senior mortgage is modified. That is not to say there is no such rule, I am only saying I am unaware of it. Consult with an attorney in Iowa who has experience in property law. See also the Dept. of Housing and Urban Development's Avoid Foreclosure: Iowa Web page.
      0 Votes

  • 35x35
    Nov, 2010
    Need advice. Live in AZ. Just got approved for Chase modification. I have a 2nd HELC but can't pay. I have been sent to collection. I'm flat broke and can only offord my first. I contacted the collection agency and can pay $25 a mo. but they laughed at me. (I owe $80,000). BTW, the end cannot foreclose in the state of AZ. I am 61 years old and will work another 4-5 years but will never be able to pay them back. Thought about bankruptcy but cannot include my HELC in a Chapter 7. That leaves a Chapter 13 but that can be very restricting and I need a credit card in the event I have a major repair. I am hearing that if my first modified then the 2nd has to follow suit. Is that true? ANY advise on what to do?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      You make several statements in your question that give me pause: 1) "the end cannot foreclose in the state of AZ." I assume you meant to write, "The second cannot foreclose in the state of AZ." I would be very surprised if this were true. 2) "Thought about bankruptcy but cannot include my HELC in a Chapter 7." I would be curious to learn why you cannot include a second mortgage in a Chapter 7. 3) "That leaves a Chapter 13 but that can be very restricting and I need a credit card in the event I have a major repair." Yes, it is restricting, but there is no prohibition against using a credit card while in a Chapter 13 plan. 4) "I am hearing that if my first modified then the 2nd has to follow suit." Untrue.

      Here is my advice: Consult with an attorney in your state who has experience in bankruptcy. I am not suggesting that bankruptcy is your only option. However, you possess some misinformation about your debt resolution and mortgage options. I want you to sit down with a expert in debt and air all of your concerns and clear the misconceptions from your thought process so that you can make wise choices.
      0 Votes

  • 35x35
    Nov, 2010
    Angie
    We live in California and have recently got our loan modification approved on our 1st mtg with Chase (Bal. owed $503K now valued at $249K). Not the best deal, didn't get our principal reduced but reduced our int. rate from 6.375% fixed down to 3% fixed for 5 years with a maximum of 4.375% for the remaining 10 years on a 30 year term. Got all the signed documents from them and just did our 1st payment this Nov. We had to go through modification to help with our finances as we have incurred so much debt from our small business. We have a 2nd/HELOC $83K that we used 100% for the business (also with CHASE)which we got advise from our lawyer not to make anymore payments since we are filing for bankruptcy anyway (personal since both my husband and i are the guarantors). After running the numbers, we were told last week that our best solution is to go Chapter 7. We don't have any plans leaving nor selling our house where we live in now. Just found out last week our 2nd is now charged off (last payment in April '10) Are we able to include our HELOC in Chapter 7? What happens to the debt on our HELOC after Ch 7 is discharged? Can they (Chase or collection agency) have the power to collect wage garnishment while in Ch. 7? and after Ch 7 is discharged? We thought of going to Ch 13 to include our 2nd 100%. I'm just surprised our lawyer didn't even give us any numbers on how much we would be paying on a chapter 13. Our total debt including 2nd, business loans (not SBA) and CC's are in the low $400K. After informing them that our 2nd is now charged off, things changed quickly. They said ultimately it does not matter that the second mortgage has a lien because they can’t sue or hold us liable after the chapter 7 anyways and most importantly they will never foreclose (is that right?) Also, does that mean our HELOC can be considered an unsecured thus can be included in Ch. 7? Thanks!
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      Go back to your bankruptcy attorney and ask him or her to explain the pros and cons of both Chapter 7 and 13 in your situation, and why Chapter 7 is better in your situation. I sense that you do not understand the definition of charge-off, and how little it means to debtors. Charge-off is not debt cancellation or forgiveness. Charge-off is the creditor moving the account from its current ledger to its bad-debt ledger, and nothing more. Charge-off does not change the legal rights of the debtor or creditor.
      0 Votes

  • 35x35
    Nov, 2010
    rose
    we have 2 mortage from 2 diffrent company.the 2nd got charged off. I was wondering, whats gonna happen next? and what if we plant to sell the house with the 2nd loan being charge off? is there any way that we can do that?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      The fact the second mortgage is charged-off means almost nothing regarding your rights and liabilities, or the rights of the creditor. See the charge-off link I just mentioned to learn more.
      1 Votes

  • 35x35
    Nov, 2010
    Lee
    Thank you Bill for your response...another quick question. Can Litton promise this and still sell it to another debt collector? Should I be asking other questions to cover ourselves in this situation?
    0 Votes

    • 35x35
      Nov, 2010
      Bill
      If a creditor signs a contract to settle a debt of let us say $100 for $25, and the debtor pays the creditor $25 promptly, then the debt is settled. The creditor promised to settle the debt, and the debtor promised to pay the new amount. Two promises -- both fulfilled. If the creditor then sells, assigns, or trades the collection account to a collection agent it will break two promises. The first promise it will break is to the debtor because it agreed the new amount settled the debt. The second promise it will break is to the collection agent. All creditors promise when they sell a collection account that the debt is valid and uncollected.

      Will the creditor or collection agent break its contract with you and sell a settled account to a collection agent? I cannot predict the future. If your intuition is telling you that the creditor is not trustworthy, then take the contract it offered you to settle the debt to a lawyer in your state who has experience in contract law. He or she will advise you precisely based on the language of the contract and the laws in your state.
      1 Votes

  • 35x35
    Oct, 2010
    Lee
    We have a 2nd mortgage thru Litton Loan Servicing. They bought it a few years back from our 2nd mortgage lender at that time. We fell behind and finally spoke with someone about making arrangements to pay on the past due amount. It is a $27,000 loan; we were told we hade 3 options since it was already charged off #1...continue to pay our monthly payments to Litton; #2..pay the total past due amount of $4174 OR #3...for a one time payment of $2888 they would settle the account. We found this hard to believe and thought they misunderstood or we were misunderstanding..they repeated several times.."no sir..I understand..you dont understand...if you settle.. you will no longer have a 2nd mortgage..we will send a letter to confirm this once payment is received and we will notify the credit company and have it removed along with the lien removal." Is this too good to be true and if they are legit, how can we protect ourselves? We are aware that Litton Loan is going through many court litigations right now....we just want to make sure..if we get EVERYTHING in writing, and follow through within the 30 days they allot is...can we hold them to this?
    0 Votes

    • 35x35
      Oct, 2010
      Bill
      If the creditor sends you a contract for the settlement of the debt and you fulfill your end of the promise, they are bound by law to keep their promises. Thus, get the creditor to send a letter indicating the terms you mention and, if they do, send the payment to settle the debt at the reduced amount.
      0 Votes

  • 35x35
    Sep, 2010
    Bill
    Your message illustrates negligence on the part of Wells Fargo. It could have allowed a short sale to proceed at $185, but because of incompetent negotiating the short sale fell through and cost Wells Fargo or its investor $40,000.

    The fact that you consider the second mortgage (it is probably a deed of trust) a construction loan is irrelevant. You have personal liability for the deficiency balance on the second, and may or may not on the first depending on whether you refinanced it.
    0 Votes

  • 35x35
    Sep, 2010
    Erik
    I had a home (paid $600k) in California. Two mortgages - first for $420 with Wells Fargo. Then I got a home improvement loan (2nd mortgage) from Green Tree (GE Money)for $90k for pool and landscaping. The loan was three checks cut directly to the contractor, so it was a construction loan. I tried to negotiate with WF for $300k... they said no. They allowed me to do a shortsale for $185 though. The 2nd wants at least 9k and WF will only give them 3k... I out of pocket offer to give the other 6k to the 2nd. WF says the the 2nd can only have 3k or no short sale. Short sale is canceled. Three weeks later it sells at foreclosure for $142k cash. So what happens with my 2nd mortgage? Since the foreclosure, over the past 75 days hey mailed out 1 letter to call them and a few messages to a voicemail phone to call them back.. but nothing else. Do they have a valid debt that i need to settle. Or is a construction loan that was collateraled by my home equity get canceled due to the foreclosure. Please advise what I should do about my 2nd.
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    The center of your issue is debt validation. I recommend you validate the debt immediately because under federal law you have a limited time to do so. Validate the debt now, today, as soon as you read this before the time limit passes. You need not hire an attorney to do so. If Greentree validates the debt, then try to negotiate a lump-sum settlement. Start at 10 cents on the dollar and work up from there.
    0 Votes

  • 35x35
    Aug, 2010
    Joe
    Bill, I'll try and make this short and only ask a few questions. I have a home that was foreclosed on in July. The first was with BOA 206k and the second was with GreenTree for 26K. I have not heard from BOA and GreenTree calls everyday asking me to set up a payment plan. GreenTree has charged off the 26k and they offered to settle the debt for 13K or allow me to set up a payment plan of no less than $100 per month and then re-negotiate at the end of year. Since my second was sold 3 time and now ended with Greentree, I have heard that I should ask Greentree to prove by proving original documents that I actually do owe them? Is this something that I should hire a lawyer to do? I was thinking about asking Greentree that if I paid them the $100 per month that they would have to submit to the big 3 that the account is current, have you every had anyone like Greentree agree to this? What are your thoughts?
    0 Votes

  • 35x35
    Aug, 2010
    Maria
    my first mortgage balance is $65k with GMAC, my second mortgage is with Chase (wamu) balance of $200k. My first is current, however, my second is in a chargeoff closed status with balance due of $200k. (This was the result of an attempt to modify the loan that never got approved) After the chargeoff status, they accepted two pymts of $2k each & have been making pymts of $650 for the past three months. They say its a "verbal" agreement only & still have the right to foreclose. They are willing to settle the loan @ 50% ($100K) but cannot find a loan. I am getting ready to call & set up 3-6 more months of pymts. They threatened once my home value increase they would foreclose. My home is currently valued @ 130K max. what would be my options if I want to keep my home? What options would I have now if I just wanted to walk away? to be able to buy again in the future, what would be the better outcome if I filed bk or foreclosed
    0 Votes

  • 35x35
    Aug, 2010
    Bill
    Talk to an attorney in your state about your rights and liabilities, and whether you qualify for bankruptcy in your circumstances. If you do, take careful notes of what the attorney tells you regarding what will happen to the second and deficiency balance if you file for Chapter 7 or Chapter 13. Call Chase. Explain what the attorney told you should you decide to file for Chapter 7 or Chapter 13. Be non-emotional and business-like, and tell them their behavior will dictate your decision: a lump-sum deal or bankruptcy. If the negotiator you are working with is stupid or evil, they will tell you to go ahead and file for bankruptcy. However, if they are smart and believe you that you are willing to take bankruptcy as an option, they will relent and negotiate a deal you can afford. I realize that foreclosure and bankruptcy are frightening subjects that push emotional buttons in most consumers. If you are married/with a partner, you need to talk over the options and both understand the negotiation is about to get even more heated and make take some time to conclude. You need need to work though that and realize this is a business decision for Chase (it is not personal to the people you speak to at all, although they may act like it is), and a financial decision for you.
    0 Votes

  • 35x35
    Jul, 2010
    Andrew
    Why have these forums dropped off? Nobody has been interested in follow-up info since 2008? Weird. I represent the stupid, the uninformed, whatever, but have yet to see an ounce of bail-out given to me. I stupidly purchased a home in 2005 banking on the same appreciation that CA and the US had enjoyed year after year after year. The mortgage payment was pretty high, but I had enough in savings to cover myself for at least a few years and anticipated building equity and transferring that equity into another property . Shortly after I purchased the home, the bubble burst. Neighbors of mine were selling identical properties for much less than I paid and the market froze. I ran out of safety money and began paying property taxes on my credit cards and some mortgage payments as well. Then, the rest of the economy caught up and I was laid-off. I got another job right away, but made a lot less. I got no help from my mortgages, 1st or 2nd, and was forced to move into a friend's house and rent a room while I rented out my place. My mortgage companies and scumbag law firms scared away my tenants with 10,000 pieces of foreclosure mail daily. I allowed the tenants to move out early of the lease and when I had the place vacant and unlocked one day, someone that the first mortgage company hired to sell, entered my place and changed the locks. I assume all of this was not 100% legal, but I'm not a billionaire bank, nor am I a minority or a single mom, so good luck with me getting anyone to even hear me out. I ended up with destroyed credit and had to rent a 60 sq ft office to live in for awhile. I had about $48000 in credit card debt and began socking away money to settle. I now have only about $3K in CC debt left to deal with and $15K in student loans that I am required to pay. However, I have a $60K charge off from my second mortgage just sitting there. It's uncollectable according to law in CA and I spoke with the lender and they won't remove unless I pay at least $12K. So basically, I got the old FU from the entire system. Where's my bail-out? I'm actually one of the few people that are productive in society. I would actually make a difference, but can't even afford to buy new pants for work at the moment since I make less than I did on unemployment. What is wrong with this country? How jaded have I become and how little sympathy do I have for anyone anymore? This situation worked out great for all of the Wall Street Execs. Their lunch tabs would change my life, but where is my help? I hope a revolution burns the entire country. I hope we have 1000 more terrorist attacks, why? Because I have nothing left to lose, so why should I care about yours?
    0 Votes

  • 35x35
    Jul, 2010
    Bill
    You paint Arizona's anti-deficiency laws with a broad brush. See the Bills.com resource Arizona Collection Laws for a more nuanced look at Arizona's foreclosure and deficiency balance rules. Your first question is tough to answer because some mortgagees will not talk with a customer about a settlement until there is a default. Others are more realistic and will talk while the customer is current. If your lender is one of the former, then your credit score is will suffer because of the default. Your questions about your credit score are all subject to negotiation. There is no law stating that a creditor must report a settled debt on a credit report in a certain manner. However, creditors may feel a contractual obligation to the credit reporting agencies to report settlements is a certain way. What my answers really lead to is this: Call the mortgagee and start negotiating.
    0 Votes

  • 35x35
    Jul, 2010
    Scott
    Bill, Thank you for this column. It is excellent. My wife and I are in AZ and own 3 houses. AZ is a non-recourse state, even for second loans. We can afford the payments on all 3 of our houses, but might be moving out of state and wish to sell them. 2 of our houses are above water, but the 3rd house has a 2nd lien on it that is not. The third house has a first of about 210K and a second of about 80K. It is likely worth in the $240K range, meaning that after closing and real estate agent fees, the second loan is worth $0 if the house is sold/foreclosed on. My plan is to call the second lender and explain the situation and the value of their loan (I can provide plenty of comps to support the valuation). I have a couple of questions. First, if I am not currently delinquent, will they bother negotiating with me to sell me the debt? My thought is to explain that I need to sell the house in order to move states and that their loan has no value. Thus, I can either pay them a de minimis amount (I am thinking of offering $10K for the loan (approx. 15%) or I will let the first lender foreclose and they will receive nothing. It seems to me that they would consider the offer since their options are $10 or no money at all. Thoughts and ideas on my proposed process and offer are appreciated. Second, if they agree to sell me my loan for $10,000, what will that do to my credit? Can I negotiate that they list it as satisfied debt, or are they required to list it as a debt settled for less than full value? The only reason I am offering the $10,000 in the first place is to save my credit from a foreclosure, so if I take a big hit for the settlement it would not be worth it. Your thoughts are always appreciated.
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    Negotiate with the holder of the second mortgage, which I assume based on the first sentence in your question is Wells Fargo. However, if Wells Fargo sold your account to a collection agent, then you should negotiate with the collection agent. Ask Wells Fargo where your account is.
    0 Votes

  • 35x35
    Jun, 2010
    Kathy
    We just received a letter from our lender (Wells Fargo) saying that our second mortgage has been charged off. It also says that the entire balance has been accelerated. What does this mean? This is a letter from the second mortgage holder. Who do we try to negotiate with to try to settle this loan?
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Judgment-creditors of mortgages have proven so unpredictable that attempting to guess their actions is foolish. Does it make sense for the second to foreclose in your situation? Some of the analysis depends on the economics of your situation. Here, the economics are iffy. The second may break even if it forecloses. I will not hazard a guess either way.
    0 Votes

  • 35x35
    Mar, 2010
    chris
    I have 500k on my first and 300k on my second. House is probably worth 700 to 800k still. I am now missing both payments. hoping to get a mod on the 1st and settle with the 2nd. but do you think the 2nd will forclose?
    0 Votes

  • 35x35
    Mar, 2010
    bob
    According to Attorney their is no financial responsiblitiy for either loan so if we were to short sale or there was a foreclosure we would not be sued for the defiicieny. They are saying they want a minimum of 30 - 50% for a settlement we do not have those funds to pay them that and they will not make a payment plan for that. Seems to me a gamble to keep paying and screw up our credit in the future if values dont come back up or we take the risk and stay and dont pay the second. Either way years and years of stress. Cant move because credit is bad from the BK. NOt many options.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Bob: You are asking the right questions but not listening to the answers you receive. No one can predict with 100% certainty how a creditor will behave when a debtor defaults. I can and have explained the rights of the creditor, but whether the creditor will exercise all of its rights in foreclosing and then pursuing you for the deficiency balance is unknowable.

    One option is to allow the second mortgage to go into charge-off/write-off. At that point the second may negotiate with you for a lump-sum settlement. As I have explained, it may foreclose, but it will probably not for the economic reasons you cite in your message. It may sit on its rights and never try to collect from you until you sell the property. Whether it negotiates, forecloses, or does nothing is up to the holder of the second mortgage. Look to your mortgage documents and your state laws to determine what interest rate and fees the second has the right to charge you if you default.

    If the second opens a negotiation with you, start at 10 cents on the dollar. Bills.com readers have reported that some -- not all -- have made lump-sum settlements for that amount.

    Your credit score will be degraded if you default on either of your mortgages.
    0 Votes

  • 35x35
    Mar, 2010
    bob
    Ok I know you have said to talk to BK attorney but they are not helping me. Nobody seems to know the answers I am asking for help with. Filed BK in 09 Discharge December 09 did not reaffirm first or second mortgage in chapter 7 that was discharged. Credit report shows included in BK. Value of house $185ish first loan balance $211 second mortgage $77,000. Have been told by numerous "experts" to not pay the second they can not foreclose because we are upside down .. Tried to do a settlement with 2nd but they will not cooperate . Will be 180 days charge off this month on 2nd. First is current. My question is If we continue to pay on the first eventually the 2nd will foreclose when we pay down the first and values go back up. According to experts we should have nothing to worry about for a long long time. Question is when we go to sell in the future how much do we owe the 2nd to get them to release the lien??? Do we owe them the $77,000 that was charged off will we have to pay interest on that amount or since it was discharged we do not owe that amount and we will be able to negotiate with them to release the lien. 2nd scenario we sell in a few years say 5 years from now and we still do not have enough to pay off the 2nd and it is a short sale. DO we have another negative on our credit report on the 2nd mortgage showing short sale or is it already negatively impacted only once when it was discharged in BK. NOBODY knows the answers to these. I NEED THESE ANSWERS!! I do not want to stop paying because we cant afford the 2nd and then loose the house in a few years or do not want to rebuild our credit and have a shortsale in 5 years or later.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Bruno: I wish I had scientific evidence to answer your question. My guess is that creditors sue to collect a deficiency balance when they think there are resources to collect. If the debtors are thought to be high-income earners they will be more willing to attempt to collect a deficiency balance than if the debtor is lower income. However, that is a logical supposition, and I have seen some creditors launch lawsuits against people who are essentially penniless, so my theory may be flawed.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Natalee: Please reread my original answer above. As I mentioned, because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency. Charged-off debt is not forgiven, unless the creditor issues the debtor a 1099 (in the case of a debt forgiven that is greater than $600.) Regarding any advice I can offer regarding short sales, I wish I had some stunning or even useful insights into making them proceed more smoothly. In this case, however, you will need need one of two things, in my humble opinion. 1) The second mortgage team at Chase to forgive the debt, or 2) The second mortgage team at Chase to agree to a lump-sum settlement for the second.
    0 Votes

  • 35x35
    Mar, 2010
    Bruno
    How often are second lien holders or their attorney/collection agency actually suing for a deficiency balance? Couldn't a cantankerous debtor drag out a lawsuit for years making it expensive to pursue?
    0 Votes

  • 35x35
    Mar, 2010
    Natalee
    I am a Realtor and have a client that just found out that her second was charged off. They called me to list their home and do Short Sale on it. How does this work with the second charged off? I have closed many Short Sales and this is the first one like this. I have not listed the home and would like to go in with, " eyes wide open" . This person has tried for almost two years to modify and both are with Chase. I just wish they would work with these people though, that would be too easy I guess. Any advise you have for me would be greatly appreciated. Thank you
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    1) Do not believe legal advice from collection agents. The advice is usually incomplete or wrong, and is always self-serving. 2) It is possible, from a legal perspective, for any mortgage holder to foreclose. It may not make economic sense for them to do so, especially today when a home price is less than the balance of the loan. 3) Someone will write a book when this mortgage crisis is over that will explain what happened behind the scenes at the mortgage companies regarding all of the lost applications. My comment does not help you now, but your story is a very common one, unfortunately. 4) You do not mention the present balance of the second mortgage. Readers have expressed to me that they have settled with collection agents who hold second mortgages anywhere from 10-30 cents on the dollar. Again, remember my point No 1.
    0 Votes

  • 35x35
    Mar, 2010
    Claiborne
    We have a 1st mortgage and have paid faithfully for 13 yrs We added a 2nd mortgage in 2001.BOTH loans are with Chase. We ended up having unforseen difficulty that would effect our payments so we contacted them to work something out, reiterating EACH time that we had TWO loans with them. From what I have been hearing we are not the only ones that Chase has LOST the paperwork on the 2nd mortgage,(unnsure if this is done intentionally or due to so many temps) We had every intention of working a payment plan for both as we wanted them combined so we could afford the payment, however paperwork arrived for ONLY the 1st loan and after many calls asking again what happened to the loan modification we were working on for the 2nd loan we were told "I apologize it was accidentally sent to another department it shouldn't have been and it has now been charged off" We requested a supervisor intervene and get it back so we may work on it. We were told "Don't worry this is more a blessing in disguise,your home cannot be taken or foreclosed since you worked out the 1st mortgage,and the only time this may be a problem is when you sell the house" However Chase sold the Charged off 2NDloan to a 3rd party. They now call asking for payments. What do you suggest? I might add the 2nd mortg. was taken out for 35K in 2001 we paid faithfully until last yr. this collection agency is asking for $42k but will settle for 28k (however it has to be paid in full,they even suggested we ask a relative!!) Please help
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Traditionally, short sales are agreed to by the bank and homeowner before the foreclosure process has begun. I would be very curious about the law firm's success rate in setting up short sales at such a late stage in a foreclosure process. Nothing in law is guaranteed, of course, but lawyers cannot walk on water either. I do not want to say a short sale is impossible at this point, but I am very skeptical. Regarding the second mortgage, you are early in the negotiation process. Continue to negotiate, and explain that your alternative is bankruptcy.
    0 Votes

  • 35x35
    Mar, 2010
    pete
    I have a first mortgage with Wells Fargo for $265,000 which is about to foreclose in two weeks (Trustee sale date) and a second with the same lender for $50,000 that has been charged off and sent to a collections attorney. The attorney's office sent me a letter about two weeks ago asking for the 50,000 or they would send me to court, I offered them 2,500 to settle and they countered with 80% (40,000), I can't pay that. I'm trying to figure out what to do, since they don't seem to want to settle, but I don't want to be sued either. I contacted, a law firm that does short sales and they said that there's a "possibility" that they can still do a short sale and not be responsible for the difference on neither loan, but need $2000 up front and it's not guaranteed. What should I do? should I continue to negotiate with the collections attorney and see what happens? Or pay the $2000 and hope for a short sale that would clear any deficiencies? Is that even possible? Like I said the auction is in two weeks and I feel like I'm running out of time, Thanks! I'm in Nevada by the way.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Bob: The answer to your first question is fact-dependent. In other words, it varies on a case-by-case basis. Certainly, the original creditor has the right to assign the collection account (which it did in your case apparently), but it does not necessarily need to sell the underlying note. I realize you are asking a yes/no question, but without validating the debt and reviewing the title on your property at the county clerk's office, I cannot give you the answer to your first question. Regarding your second question, I really want you to bring your bankruptcy-related questions to the attorney who filed your bankruptcy petition. Again, you are asking a fact-dependent question that I cannot answer without reviewing your bankruptcy documents. Regarding your final question, charge-off means almost nothing to you legally. Charge-off does not mean the debt is forgiven, erased, or forgotten. You may negotiate a charged-off debt.
    0 Votes

  • 35x35
    Feb, 2010
    bob
    After the 2nd mortgage is charged off and they sell it to a collection agency do they sell the lien as well. Also can the collection agency settle with you or can they foreclose if they bought the lien and debt?? Do you legally owe the new collection agency that bought your 2nd mortgage if the debt was discharged in chapter 7 ... After the charge off does that mean you no longer can neogiate with them??
    0 Votes

  • 35x35
    Feb, 2010
    Christina
    A collection company who buys the debt may sue you to get back the money. It is best to settle the debt especially in your case since the debt is almost charged off you should be able to get it down to 10 cents on the dollar. Then you don't have to worry about the lien or getting sued for the full balance of the second mortgage. You may just end up doing the same settlement with the collections agency anyways, so it doesn't pay to wait and then have this as a mark on your credit report.
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Bob: If a debt is discharged in bankruptcy, it no longer exists except in the wishful thinking of the creditor. Do not pay a creditor a dime on a discharged debt -- doing so will reinstate the debt. Talk to your attorney about this debt and your creditor's actions. Its behavior may be contrary to bankruptcy law. Regarding "charge-off," the term does not mean the debt is forgiven. From a legal perspective, charge off means almost nothing to the debtor. See Charge-Off & Credit Report to learn more about charge off and your options for resolving the debt.
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Scott: 1) A short sale on the first mortgages does not eliminate your liability for the second mortgages, unless there is some agreement between the two mortgagees to the contrary. 2) Yes and no. You are negotiating with humans, and you might have a better rapport -- for whatever reasons -- with one more than the other. In other words, I am not aware of law firms negotiating any differently than other collection agents from a macro perspective. 3) Your window to ask to validate the debt is narrow -- 30 days, which may have passed. 4) Bills.com readers have reported to me that they have settled second mortgages for 10 to 30 cents on the dollar.
    0 Votes

  • 35x35
    Feb, 2010
    bob
    Ok i looked at my statements from them they say if it is discharged in bk that they are just mailing statments for informational purposes. According to their collections department manager on February 28 we will be 180 days late and they will charge off our account. SO does that mean they are not foreclosing on us then. Does that mean that the collection company they sell it to can then sue us or do they to have no rights since it was included in the bankruptcy. Can they foreclose on us after they have charged off our account??
    0 Votes

  • 35x35
    Feb, 2010
    Scott
    I purchase a home in CA in 2005 and refi'd in 2006. The first is $712k and second is $178k. Both are with Well Fargo. I'm about to receive a 6-month special forbearance agreement on the first for $2,250 per month. The second has been charged off and is now with Gordon & Wong, a law firm that has sent me one notice but has not contacted me otherwise. I called them and offered $5k to settle and that was rejected and countered with $121k. It's my primary residence, but I'm not particulary attached to it. I also have a rental property (which I like more) also in CA that's been refi'd and that has a $454k first with Aurora that's near the end of a special forbearance agreement and should be modified soon. The $107k second was with Chase but has been charged off and sent to AIC, an agressive collecions agency. I offered $11k to settle and they quickly dismissed that and countered with $77k. Both properties are worth less than or near the value of the first mortgages. My questions are: can I short sell either property and get away from the second? Should my negotiation strategy differ between the collections agency and the law firm? I'd like to send a letter back to AIC to force them to validate the debt. My goal was to try and settle the seconds for 10%. Is that unrealistic?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Before you give the second mortgage holder a dime, contact your bankruptcy attorney and review the bankruptcy trustee's order in detail. Just because a creditor says you owe it a debt does not make the statement true or accurate. If the second was discharged, then ask your attorney to send a letter to the second that explains your rights under the law.
    0 Votes

  • 35x35
    Feb, 2010
    bob
    We filed chapter 7 in the fall and it was discharged. We included both the first and second mortgage in it. We are current on our first but 5 months late on the second. they are going to charge off and say then we can be sued for the balance. They have refused to modify or take a settlement from us which we have worked with them for the last year on. My question is they cant sue us if it was discharged in bk. They are saying that we will still owe the balance. but we did not reaffirm the debt so we dont owe anything. What will the collection agency do to us. Can they set up a payment plan or will we have to pay all of it in full. can they garnish our wages if it was included in bk. We are keeping the property.
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    You are still have liability for the second mortgage regardless of it being charged-off by the creditor. Because you purchased the Arizona home as your residence, and used it as your primary residence, that status does not change because you moved from the area and not have a different primary residence.
    0 Votes

  • 35x35
    Feb, 2010
    Juan
    We purchased a home in Arizona back in 2006. In 2009 we had to mave back to Texas, before I had to move I called Wells Fargo and asked about selling my home as a "short sale" because there was no way my home would sell for what we owed on it. Wells Fargo told me no on the short sale, the only way the would even consider a shaort sale was if I was at least three months behind on my payments. We are very responsible people and did not want to do that but after we were forced to move to Texas, we could no longer afford to pay for our first or second mortgage which are both with Wells Fargo. I listed my home in the past several times but we did not get any offers. Any ways we purchased another home in Texas and now are in default with the home in Arizona, we finally got an offer on the home in Arizona and the bank is intertaining the offer but has not given us an answer yet. If the first mortgage takes the short sale offer will I still have to pay the second mortgage that is now in Charge off status? The home in Arizona was purchased as our primary home but since moving to Texas we have purchased another home does that change the status of my first home as being primary home?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    "Charge off" and "write off" are synonymous. The terms do not mean the debt is forgiven. From a legal perspective, charge off means almost nothing to the debtor. See Charge-Off & Credit Report to learn more about charge off and your options for resolving the debt.
    0 Votes

  • 35x35
    Feb, 2010
    sharyn
    my first mortage tells me that it is wrote off but they are trying to collect as much as they can recover what does this mean? can anyone out there answer this question?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Bring your agreement to an attorney in your state who has experience either in real estate law or consumer law. Ask him or her to review the agreement with the collection agency. Ask him or her to draft and send a letter on your behalf to the collection agency stating that if the collection agency does not release the lien you will file a breech of contract or fraud lawsuit against the collection agency.
    0 Votes

  • 35x35
    Feb, 2010
    Sharon
    I was in forclosure status on my home when the second lean Holder, Citi charged off the loan. I then settled with their collection agency for 7% of loan in 2008. I had refinanced both the fist and second in 2005 and I live in California. I understood that citi would issue a 1099 but I have not recieved it so far. Also I have only a letter from the collection agency as to the settlment but have not recieved a release of lean. I have spent many hours trying to get this resolved often getting tranfered only to be put on hold to be transferd again. The collection agency said to call citi for the lean release citi said to call them. Not sure what to do now. Is it possibel that the collection agency lied when they told me the loan would be paid off with the settlement? Also im in the middle of trying to modifie my first loan and was wondering if the second can come after me years down the road after home values increase and my first gets paid down? Thanks and please overlook all of errors with spelling.
    0 Votes

    • 35x35
      May, 2011
      Louise
      my husband and I went into Contract for our home back in 2004. We then ended up filing for chapter 13 bk in 2005. We paid on our 13payments for 4 yrs then got a letter from the trustee that we would not have had enough paid Into our BK so we either needed to up our payments or roll over into a 7. Well our house was in the 13 and we were making payments through it. Well my husband and I split up About this time and he rolled his half of the 13 into a 7. And I did nothing. I got a modification from my first mortgage co. But I haven't heard anything from my second. It's shows on my husbands credit report as included in BK, both of them are reporting that even tho I am making payments to my first. His Chapter 7 was 2 years ago, I am just now being able to afford to file my BK. I don't want to file a 13 I want to be able to Be done with it all in a 7. But I want to make sure that second doesn't come back to Haunt me, I am over 125,000 upside down and my 2nd was 77000. My husband and I are still working on our marriage and if we do stay married how will This effect us? Because if I end up filing a 13 to get rid of it he only filed a 7? Any advice would be great!!
      0 Votes

    • 35x35
      May, 2011
      Bill
      Take your spouse's bankruptcy discharge to a bankruptcy attorney to learn what portion of the mortgages, if any, were discharged in the Chapter 7 from two years ago. Also bring your mortgage documents so that it is clear to the bankruptcy attorney what, if any, liability you have for the first and second mortgages. I realize a lawyer's time is expensive, but you do not need me, or anyone else, guessing what happened with your spouse's Chapter 7 and how it impacts you. You need someone to give you concrete answers.
      0 Votes

  • 35x35
    Feb, 2010
    Bill
    Thank you for the clarification. Sure, what you are asking is possible. The catch is the house would need to be returned to the creditor. In other words, the bankruptcy would cause your ex-spouse to lose the house, if the bankruptcy is a Chapter 7 filing. It is not clear to me that you would be able to insulate your ex-spouse's property in a Chapter 13 because it is not the debtor's homestead. I urge you to consult with a Colorado attorney with experience in bankruptcy law regarding this issue, and because your overall situation is so unusual. One idea: Contact the second mortgage holder and explain the situation. Explain you are considering Chapter 7, in which the second mortgage holder will get $0. Negotiate a lump-sum settlement of the second mortgage. Start at 10 cents on the dollar. Under the circumstances, it would be wise to explain the situation to your ex-spouse and explain that it would be in her best interest to kick in some funds (which you will repay to her) to the settlement so that she can stay in the property.
    0 Votes

  • 35x35
    Feb, 2010
    Albert
    Thanks for your response back on January 13th Bill. I know the circumstances are not typical, but I assure you that the 2nd is solely in my name and is secured by the home my ex-wife got in the divorce. I agreed to take on this debt thinking I could settle it for less than what was owed. I'm still on title for that home as well as the primary mortgage since the lender won't remove me without a refinance which she wouldn't qualify for. So my question is are there any circumstances whereby a second mortgage, which is secured in this case, can ever be forgiven in a chapter 7 bankruptcy prior to selling the home or losing it through foreclosure?
    0 Votes

  • 35x35
    Feb, 2010
    Bill
    Guidelines for writing modifications are at the discretion of the lender. My guess -- note that word choice -- is that your lender reset the date of the mortgage when writing the loan modification. (Without seeing your loan documents I cannot say that for certain.) It is now -- apparently -- second in line to the second mortgage. If so, then you are at the mercy of the holder of the second mortgage if the holder of the first wants the second to subordinate. If the collection agency that holds the note on the second refuses to subordinate, then the loan modification could be denied. Therefore, it is in your best interest to open a negotiation with the collection agency to try to make a lump-sum settlement of the second mortgage. Do not reveal that you are in the midst of a loan modification. If you do, you will give them enormous leverage. See Debt Negotiation and Settlement Advice to learn tips and tactics that will help you in this effort.
    0 Votes

  • 35x35
    Feb, 2010
    Denise
    Hi, thanks for your reply. Our mortgage has been modified. We are not doing a refinance. Our mortgage has actually been reduced and we have been paying the new agreed upon amount. We just recently received a request from the mortgage company informing us that they need our 2nd mortgage to subordinate the loan for them to complete our modification. The 2nd has been charged off and sold to a collection agency. So I was wondering if this would having any bearings on our modification being complete. Thanks
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    A mortgage modification does not reset the date of the mortgage, so a subordination should not be required. Are you sure you are not actually getting a mortgage refinance? A refinance would require a subordination. Regarding subordination, I cannot speak for the collection agency, so I do not know if they will agree to subordinate. Ask them. Ask if they will agree to a lump-sum settlement of the balance due. Explain that if they do not agree to a settlement of 10 cents on the dollar (or thereabouts) that you will declare bankruptcy, walk away from the property, and they will be left with zero cents on the dollar.
    0 Votes

  • 35x35
    Jan, 2010
    Denise
    My 1st mortgage has been modified and we have been making payments for 6 months but they are now asking for a subordination with the 2nd mortgage. Chase has charged off the account and sold it to a collection agency. What happens now. Can a collection subordinate a mortgage. Will this stop my modification from being complete.
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    The second mortgage being charged-off has no legal significance to you. Because you have filed for what I presume is a Chapter 7 bankruptcy, then I do not see that it makes any difference if you receive approval for a short sale before or after receiving an offer from a potential buyer. However, there may be other relevant facts about your situation that you did not include in your message or that I am not comprehending. Consult with your bankruptcy attorney before taking any actions regarding the sale of your property.
    0 Votes

  • 35x35
    Jan, 2010
    Sally
    I am trying to sell my property - behind on 1st by 4 mos. and 2nd by 17 months. When I called 2nd they advised it had been charged off. I filed bankruptcy last year which both mortgages were included, so I am not concerned as to paying hte balances, however, if I get an offer on property they still have liens against both - so do I have to get approval for short sale PRIOR to an offer, or would I be better off trying to settle charge off on 2nd in order to get lien cleared?? a sale would cover my first loan and some of 2nd, but not much. If i can get rid of lien, it would be just a regular sale and not a short sale?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    A foreclosure will appear on your credit report for 7.5 years. This time limit is set by the Fair Credit Reporting Act. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by TransUnion, Equifax, and Experian, add 7.5 years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. Regarding your question, I agree with the timing of Experian's explanation, but I disagree that the charge-off should be considered "current." The date of first delinquency should appear as the date it was originally charged off, which would be the foreclosure date.
    0 Votes

  • 35x35
    Jan, 2010
    Desiree
    Our house went into foreclosure Dec. 2007, the 2nd mortgage reports it as Jan. 2008. It is listed as a charge-off with a zero balance. However, our issue is that Experian reports the charge-off date as January 2010. When I asked them about this, they said because it was an unpaid charge off the 2nd mortgage company can report it each month as a current charege-off until August 2014. This does not seem right to us...Any advise?
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    Stay in contact with your attorney, and follow his or her advice. You did not mention the current market value of your property. If the market value of your property is at or below the balance of the first mortgage, then I agree with your attorney's analysis. However, if the value is greater than the balance of your mortgage, then your attorney is in error. Why? If the second mortgage holder forecloses, it is not automatic that the first mortgage holder will foreclose, but to protect their rights it would be foolish for the first mortgage holder not to foreclose as well. The house will be sold, the first mortgage holder will be repaid first, followed by the second mortgage holder if any funds remain. Typically today, the sale price is less than the value of the first mortgage, wiping out the second (junior) mortgage. If that is the case, then in some states the borrower could still owe an unsecured balance, which is called a "deficiency balance." The good news is that a deficiency balance (if it exists and if your lenders pursue it) is an unsecured debt (like credit card debt) that can be enrolled into a debt settlement program. What does all of this mean? Because the home values have fallen so much, it is very unlikely a junior mortgagee will foreclose -- it makes no economic sense to take this action.
    0 Votes

  • 35x35
    Jan, 2010
    Robyn
    We filed Chapter 7 and it has been discharged on January 7, 2010. We have a mortgage and a home equity loan. Our mortgage payments are current and up to date and the balance on the house is 151,000.00. Our home equity loan is 45,000.00 and was current until we filed bankruptcy. Our lawyer told us to stop paying the home equity loan. He stated that with such a high balance on our first mortgage, it was very unlikely that the home equity loan company would foeclose because they would have to pay the first mortgage off beforehand. Will they pay that much off or will they put a lein on the house? If they put a lein on the house can they garnish our paychecks or take our tax returns, what happens.
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    I cannot answer your question because I do not know the specifics of your divorce decree. I would find it very unusual that a divorce settlement agreement would be structured whereby your spouse gets title to a property but you are required to pay its second mortgage, although stranger agreements have been created. This is a good question for your divorce attorney.
    0 Votes

  • 35x35
    Jan, 2010
    Albert
    I live in Colorado, recently divorced and lost my income. My ex-wife and I had 2 properties together and each got 1 in the settlement. We are both on both notes and titles. Currently, there is also a $200k 2nd (solely in my name) on the house she lives in. Could I include the 2nd in a chap.7 bankruptcy (assuming I qualify) and have the lien removed from the home she lives in? Her primary mortgage is up to date and she'd like to stay in the house. Currently, there is not enough equity in that house to pay off the 2nd shoud it be sold.
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    After write-off/charge-off, Wells Fargo has the option to sell your account to a third-party collection agency. However, Bills.com readers I have spoken to and corresponded with report that generally speaking second-mortgage holders transfer collection accounts to internal call centers that specialize in negotiating with delinquent customers. Therefore, I think the chances are that if your second is written off you have good odds you will be speaking to a Wells Fargo call center.

    Regarding negotiating with a third-party collection agent vs. the original creditor, I have heard of no evidence either way if consumers fare better with one or the other. Given the tremendous drop in home prices, second mortgage holders are in a tough spot. If they refuse to negotiate, homeowners will default on their mortgages, the first mortgage holder will be repaid leaving the second mortgage holder to try to collect a deficiency balance from an insolvent or bankrupt consumer. Therefore, it is in the second mortgage holder's best interest to try to minimize their losses and negotiate a settlement.

    See Debt Negotiation and Settlement Advice for negotiation tips and tactics.
    0 Votes

  • 35x35
    Jan, 2010
    Kathy
    Hi - thank you for the information. What I am really wondering though is - in your experience, do you think we should try to begin this settlement process with WF, or wait until it's charged off? Do we have a better likelihood of success with one vs. the other? Do you have a section that pertains to negotiation advice? Thank you.
    0 Votes

  • 35x35
    Jan, 2010
    Bill
    You are really asking me to speak for Wells Fargo, which I cannot do of course. Generally speaking, if you are current on an account and call customer service, the representative will be able to recite what is on their computer screen, namely "Make your account current, please." As an account becomes delinquent, usually after 90 days but that varies, it moves to a different call center where the representatives have the authority to negotiate settlements. Therefore, call the telephone number printed on your second mortgage statement and ask the representative if he or she can negotiate a settlement or if that is handled by another department. Ask how long an account must be delinquent before moving to that department. If you do not get a useful answer call back and speak to a different representative.
    0 Votes

  • 35x35
    Jan, 2010
    Kathy
    We are two months late on our 2nd mortgage (both 1st and 2nd held by Wells Fargo). We are unable to continue to pay our 2nd and have been reading all of the information regarding charge-offs of 2nd mortgages. What I'm wondering is, should we approach the lender now and try to work out a settlement with them, or let the account go to chargeoff and then work it out?
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    Terry: No, if you keep careful and complete records you will not pay the second mortgage twice. The title and the note can be held by separate parties, like they are here. What is supposed to happen is that when the note is paid that creditor will send a message to the title holder that the note is satisfied and you will be given the title for the second mortgage. Alternatively, the title will be extinguished.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    Tim: Explain what you wrote here to Chase. Today, most second mortgages are not worth the paper they are printed on if the bank forecloses due to the overall drop in value of home real estate. According to Bills.com readers with whom I have corresponded, banks holding second mortgages negotiate hard, but realize they have no recourse if the homeowner files for bankruptcy. Smart banks settle for what they can get, and according to readers that varies from 10 to 30 cents on the dollar.
    0 Votes

  • 35x35
    Dec, 2009
    Tim
    I have a second and third mtg with Chase. I have been unemployed for almost 2 years and ran out of savings. My home has no equity, but I still do not want to move. Will Chase entertain a 50% pay off on a second mtg? If I lose the house, Chase would walk with nothing and I would be forced into a BK 7.
    0 Votes

  • 35x35
    Dec, 2009
    Terry
    I have a similar question of the the 2nd Lien I've heard others speak about. But My question is I defaulted on my small 2nd mortgage. It was then charged off,. But then sold to a debt purchaser who of course then begins to collect. I've been paying the new owner of the debt, But my old 2nd lien holder still has the original lien on title. Can they do this if they have sold the debt, and am I going to end up paying 2 companies for the same lien.??
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    The call center you are speaking to has a quota for either the amount settled or the percentage of the original balance. The call center's quota cascades down to each representative. Talk to more than one representative at the call center. Be polite, business-like, and friendly. Try to learn the call center's quota and act accordingly. You may be able to negotiate an agreement where you pay 10 cents on the dollar to resolve the second mortgage, but that may be impossible according to the creditor's policy. Maybe 20 is as low as they will go, and it would be folly for me to speculate what is the best offer you will receive.
    0 Votes

  • 35x35
    Dec, 2009
    Ruth
    My second mortgage got charge off by NAT City, I got a offert for 20% settlement, I called them back and offert them 10%, I do not have the money for 20% but I can borrower a 10% wich it's $14,400. Do you think that will they take my offert, or should I try to raise more money to complete the $29K.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    I commend Wells Fargo for allowing its customers to comment on their experiences -- both positive and negative -- with the company's HAMP performance. To be fair to Wells Fargo, people with negative experiences are more likely to seek out a public forum to express displeasure than if they have a positive experience. That said, I hope Wells Fargo executives are paying attention to the articulate and detailed complaints Wells Fargo customers are expressing. Unfortunately, Wells Fargo customers are not alone in their complaints regarding mortgage companies and HAMP. My only advice to homeowners regarding HAMP is to double-check their documents to make sure they are complete, make copies of these documents so that you can fax them to the bank at a moment's notice if the bank loses a document, which seems to be a common incident.
    0 Votes

  • 35x35
    Nov, 2009
    Rocky
    Thank you sir, I just read through the HAMP program which says that I will be eligible if my mortgage is greater thatn 31% of my gross income. If that is the truth and if WF approves it, I will be really glad. Have you heard any success stories about this program? there are bad storied associated with this program as per this blog http://blog.wellsfargo.com/wachovia/2009/08/a_hamp_loan_modification_updat.html
    0 Votes

  • 35x35
    Nov, 2009
    Rocky
    I had first(400K) and second(84K) with WF the same bank, we tried loan modification and the bank replied after 9 months to do a short sale. We started that process, found a buyer, first mortgage approved the short sale but the second one didn't and came back with a recommendation to do a loan modification again. Contacted the bank and now they say that the HAMP program might help. They are not telling me why I would qualify this time and what is the difference in this program as compared to the first loan modification program. Our loan is not secured by Fannie/Freddie, there is no guarantee that the Bank will approve. I am tired and planning to give up and go with foreclosure. Is there anything that I can do before I take that action.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    Your guess is as good as mine as to why WF (which I presume is Wells Fargo) suggested a short sale nine months ago when you wanted to do a loan modification, and why today when you bring them a short sale buyer that Wells Fargo tells you to do a loan modification. My guess is that Wells Fargo has refined its models or projections for which cutomers qualify for loan modifications, and today you qualify under their new models. I do not recommend foreclosure unless it is impossible to avoid. Accordingly, if you can continue to afford to live in your home during the waiting period, then do so. I hope you are keeping good records. You may have a cause of action for a breech of contract if Wells Fargo continues this erratic and contradictory behavior that offers the appearance of dealing in bad faith.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    If your numbers are correct, I have no idea why anyone would choose Option 2, given that it costs you $2000 more than Option 1. The knowledge-base of renegotiating second mortgages is not deep, so we are all (including the banks) entering uncharted territory. Here is what I have learned. Each bank has its own quotas and goals for its call centers. Accordingly, these goals and quotas filter down to the service representative level. It is impossible for me to say what the lowest offer BofA will accept. My advice is for you to read Debt Negotiation and Settlement Advice and gather as much intelligence as you can from each representative you speak to. See if BofA is open to a lower offer. If so, counter their offer with one of your own. Let us know how you resolve this debt.
    0 Votes

  • 35x35
    Nov, 2009
    Allan
    We also had a 1st and 2nd mortgage and completed a short sale. My situation is different though in that the 1st mortgage has been resolved but the 2nd mortgage accepted $4000.00 with the agreement that the remaining amount be charged-off. After months of no contact, I received a call yesterday from a BofA representative and without committing to a deal was offered a negotiation on my $18,000 balance. I conversation I let her know I recently lost my job and was on unemployment. Option 1 is $62.63 a month is for 10 years and option 2 is $156.00 for 5 years with no interest. Is this a good deal? And since this is the 1st offer, if I do try to negotiate a better deal, how should I proceed into the negotiation? I do not have the money for a large payoff. Thanks in advance for any advice.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    I agree with your analysis: from an economic perspective it makes no sense for the bank to foreclose. However, it is within the bank's legal right to do so, as idiotic as that would be. The bank's best outcome is to negotiate a settlement of the balance. Stay current on the first mortgage. Contact the bank and open a negotiation to resolve the second mortgage. Read Debt Negotiation and Settlement Advice before you open talks with the bank.
    0 Votes

  • 35x35
    Nov, 2009
    AJ
    My home value is $130,000, my first is about $241,500 and my second is $73,000. Both loans are with the same bank. My first is owned by Fannie Mae and my second is owned by the bank. The bank is modifying my fist mortgage but didn't, at least so far, modify the 2nd. I'm current as to the 1st mortgage and I'm 4 months past due as to the 2nd. I'm hoping the bank will modify it, however, if they won't, I will not be able to make the 2nd mortgage payments. I don't see why they would foreclose for non-payment! The house value is less than the balance of the 1st mortgage by over $100,000. Should I take any actions at this point that might help me in the future if the situation regarding the 2nd progresses to whatever, such as charge off, foreclosure, etc.
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    If I understand what you are saying correctly, you and the second mortgage company had an agreement to settle the second mortgage for $3000, and you have not yet paid the $3000 to the second mortgage company. If this is the case, then the second mortgage company has an unsecured claim against you. This is like any other unsecured debt a consumer may have, such as credit card or medical debt. You may resolve unsecured debt any number of ways. Please see What Are My Debt Consolidation Options? to learn, well, more about your debt resolution options. One is bankruptcy, but you have others.
    0 Votes

  • 35x35
    Oct, 2009
    Kristen
    Yes, the 2nd was included. They asked for $3000 to close and release the lien which we thought was what they were willing to take to close out the loan. After closing, we received notice that we had to either pay the balance or set up monthly payments. Thank you for the links for collection and the Mortgage Forgiveness. We are just deciding whether it is better just to file bankruptcy on over this balance or try and fight it??
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    Was the second mortgage included with the short sale? Reread your documents to see if both lenders were included in the short sale -- I would be surprised if both were. See collections advice to learn more about your rights in the collections process. See The Mortgage Forgiveness Debt Relief Act and Debt Cancellation to see if your debt forgiven in your short sale is exempt from taxation.
    0 Votes

  • 35x35
    Oct, 2009
    Kristen
    We too had a 1st and 2nd mortgage but completed a short sale. We still had a balance owed on the 2nd after closing and were under the impression that the short sale forgave all remaining balance once they accpeted the buyers offer and it closed. We are now being contacted by the bank to pay the remaining balance on the 2nd. We are unable to make the monthly payment that they want us to pay. What happens if we stop paying this amount? I am also hearing that we will have to pay income tax on this balance??
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    These are questions best answered by your bankruptcy attorney. Hopefully, he or she included the second mortgage company in the list of creditors. If so, the discharge may have included the second mortgage, which would have, in effect, invalidated the lien.
    0 Votes

  • 35x35
    Oct, 2009
    Jennifer
    We had a first and a second mortgage like most here - and have gotten a work out agreement on our first for 3.25% for 30 years. After trying to accomplish the same on our 2nd, we were told the 2nd has been 'charged off' and sold. We havent heard anything since. We also filed bankruptcy - and included the house loan in the debt. I am curious if we are still liable for the 2nd and did our Bankruptcy discharge this debt? If so, does our 2nd have to release their lien on our property? Thanks!
    0 Votes

  • 35x35
    Oct, 2009
    Bill
    It seems strange that the creditor took four years to contact you. I urge you to take this matter to an attorney in your state experienced in either property or contracts law immediately. There may be a statute of limitations issue in your case that has a profound affect on the creditor's right to collect on the balance due.
    0 Votes

  • 35x35
    Oct, 2009
    Judy
    Like everyone else we are having trouble keeping up with the mortgage, in fact we have applied for a hardship loan modification on the first. Our second was a seller carryback. Over the last several years, we have re-financed several times, each getting a better deal than the last with the final a fixed 6.5 four years ago on the first. Along the line, I believed that the second had been satisfied. Having not heard from the second lien holder since 2005, how would I know different? A few months ago we received a demand letter from a real estate atty who represents the seller, who states that the second has a balance due. Apparently the second was never paid with the refinancing and a lien was not properly filed with the county. I ceased making payments in 2005 when I thought that the second was satisfied, now we are in breach of contract. Okay - so we owe it, through no fault of our own. The seller's atty is telling me that he will re-write the note taking the interest at 5% back to 1997 and have a 5 year balloon. I have tried to negotiate with him to no avail. He will now sue foreclosure. Question - do I have to get an atty to re-write the note? What if the seller's atty does not go along with it? Should I sign a balloon in this current financial climate. I don't see us selling and moving at our ages 61 and 74! Any input is most welcome! JUDY
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    By definition, a settlement is a final resolution of an issue. I can see no down-side to accepting the settlement offer. The alternative is foreclosure, a process in which no one wins. With this offer, you get the second mortgage off of your back for 30 cents on the dollar and the second mortgage holder gets to recover a fraction of the principal without spending a dime. I see this as a win-win, especially in light of The Mortgage Forgiveness Debt Relief Act, which allows homeowners to exclude from income debt canceled or forgiven by lenders. However, if you sense that the collection agent is not being totally forthcoming or underhanded in his or her dealings with you, take the settlement agreement to an attorney in your state before signing it and let him or her review it.
    0 Votes

  • 35x35
    Sep, 2009
    terry
    I have been offer a 30% settlement on by the collection agency for my 2nd mortgage. If I accept will there be a down side to this can they hunt me later for the rest.
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    As I mentioned above in my earlier answers, it is not in the second mortgage holder's best interest to foreclose. To learn more about bankruptcy, see the Bills.com document Types of Bankruptcy. If your goal is to hang onto your house, then Chapter 7 bankruptcy is not in your best interest -- Chapter 13 allows you to preserve a large asset such as your residence. I recommend you speak with a bankruptcy attorney in your state about your options.
    0 Votes

  • 35x35
    Sep, 2009
    carl
    I GOT A CALL FROM MODIFICATION COMPANY I AM USING THEY TOLD ME THEY HAVE GETTING MY LOAN MODIFY THE FIRST ONE WITH OPTION ONE MORTGAGE, THEY ALSO TOLD ME LENDER HAVE CHARGE OF 2ND I AM WONDERING CAN I FILE BK CHAPT.7 ON SECOND HOUSE IS 100K LESS THN I PURCHASE IT FOR 2ND IS 60K ... I HAVE NOT SIGNE DOC. YET WHAT SHOULD I DO? CAN LENDER FORCLOSED ON 2ND MORTGAGE....
    0 Votes

  • 35x35
    Sep, 2009
    Bill
    Listen to your attorney. I agree with his or her analysis of your situation. In the unlikely event the second mortgage holder forecloses, it is inevitable that the first mortgage holder will foreclose too. The first mortgage holder would get the proceeds of the sale of the property, most likely leaving the second mortgage holder with nothing except a claim against you. Since you are in bankruptcy, the second mortgage holder's chances of seeing a dime are pretty close to zero. Therefore, it is not in the second mortgage holder's best interest to foreclose. When in bankruptcy, I have seen a tendency for some people to become freelance debt negotiators and speak to creditors outside of the bankruptcy process. Do not become a freelancer. Work with your attorney. Involve him or her in ANY discussions you have with ANY creditors while you are in this process.
    0 Votes

  • 35x35
    Sep, 2009
    BROKEGIRL
    We have a first mortgage with Chase balance 213,000 which we modified for 3.85% for 40 years fixed and then we have a second mortgage that was with Bank of America for 77,000 that was transferred to Green Tree who are ruthless animals. We are current on our first mortgage and 30 days behind on our second. We have filed Chapter 7 to get rid of credit card debt. Our lawyer is telling us to not pay the second mortgage and try to get a settlement offer or renogiate after the bk discharge. Our house values have gone down drastically and the average sale price is 160,000 - 170,000 from comps and realestate agent estimate. What should we do??? I am scared they will forclose on us and force us into a shortsale. Lawyer says that they wont do that because as long as we are current on the first that Chase wont foreclose because they are current. Greentree would not foreclose because the values are so low they would get nothing. Greentree says in a shortsale all they want is 5% of the sales price. Should we pay them or wait till after BK to neogoiate and can I try to negoiate now while in BK???
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    It does not appear to me that the creditor is bullying you. When a creditor charges-off a debt, that does not mean the debt is forgiven or resolved. The creditor has simply made an accounting entry on its books (usually at 120 days) that the account is no longer current. Different creditors handle charged-off debt differently. Some sell the account to a collection agent, which will try to collect the debt. Other creditors transferred debt to a delinquent-accounts department, which will work with the debtor to develop a payment plan. To learn more about the collections process and garnishment, see "Collections and Garnishing Wages." To learn more about the collections laws in your state, see the Bills.com document "Collection Laws and Statute of Limitations."
    0 Votes

  • 35x35
    Aug, 2009
    Roxanne
    My first mortgage went into foreclosure. My second mortgage is in default. I was served papers that they were sueing us. I recieved a call from the second mortgage today stating mt account was about to be charged off and if I did not want my wages garnished I could set up payment arrangements with them in the local office. Are they trying to bully me into paying them? I know all the consequences of my credit, and that is something we have accepted. If the account is charged off, can my wages still be garnished? If it makes a difference, we live in Louisiana.
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    There are too many variables at play here for me to give you a fast answer, so my first (and last) word of advice is for you to see an attorney in your state with experience in property law. Here are your wild cards: 1) A short sale is not something you can do unilaterally. Will your first mortgage holder agree to a short sale? 2) Did you get the second mortgage at the time of the purchase of the property? 3) Is your state a "recourse" state regarding home loans? In other words, are you personally liable for a deficiency balance on a mortgage? Aside from question No. 1, you need to see an attorney in your state to determine your status regarding the expected deficiency balance on the second mortgage.
    0 Votes

  • 35x35
    Aug, 2009
    liz
    I bought my house for 678K in 2006, now market value is 400k. My first is w/ Litton Loan 505K, the second with Wilshire 180K. Litton is agreeing to modif which I can afford, but I would have to not pay Wilshire because I cannot afford to pay. Litton already has a foreclosure going on though they are agreeing to modify if I am good for the next 3 months. Then I met a realtor who was able to get me a buyer for a short sale offer of 455K. Is it in my favor to keep the house and have a charge off from from the second loan? or let a short sale go through (hoping my lenders will approve the short pay off)and get a better house I can afford in two years? My credit is gone anyway, why can't I just keep the house just paying the first loan and let the second charge off? Thanks for your input! Liz
    0 Votes

  • 35x35
    Aug, 2009
    Bill
    I cannot speak for Citi, so what I think Citi might do is speculation. In general, if you stop paying a second mortgage, it is within the second mortgage holder's right to foreclose on the property. However, if the second mortgage holder forecloses, the holder of the first mortgage holder will be inevitably be notified and they will foreclose, too. Because the first mortgage holder is the first in line for repayment when the property is sold, the second mortgage holder is usually left with little or nothing, especially lately. The second mortgage holder's recourse is to sue the property owner for the balance of the loan. Therefore, the second mortgage holder has every incentive to find a way to reach a repayment agreement with the property owner
    0 Votes

  • 35x35
    Aug, 2009
    Lynn
    I have a question: My house current vuale is about $480K-490K, first mortgage is $361K, 2nd mortgage is $240k. They are both with Citi. The first mortgage' investor is Fannie Mae, the 2nd is Citi. Do you think if i stop paying the 2nd mortgage, is Citi going to foreclose the house? Or is Citi willing to settle the loan with me? Thank you.
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    It sounds like you have been active in trying to resolve your issue rather than letting it manage you. The first thought I have is recommending you look at the Home Affordable Refinance Program to see if this government program offers you anything. A second thought I have is a recommendation that if you get pushed to your breaking point, go with the short sale and try to avoid foreclosure. Finally, consider a Chapter 13 bankruptcy.
    0 Votes

  • 35x35
    Jul, 2009
    Marina
    I bought an appartment in 2007 for $517K - 80/20. 1st mortgage - Ocwen, 2nd - GMAC. Of cause, I can't keep up with payments because my income after tax $3,600 total (I should not buy it in the first place!). Anyway, I was able to modify both loans, 1st and second mortgages, by myself in 2008. However, my monthly payments are still too high. Therefore, right now I am working with mortgage assistance/modification company (AmeriHope Alliance) to negotiate my mortgages again. I am current on my mortgages. My property value right now about $370K. I owe $93K in second mortgage - GMAC. If I can't negotiate my loans to reduce my payments I will be forced short sale or foreclosure. In this case, second (GMAC) wouldn't get anything. My loan negothator from AmeriHope will ask GMAC for settlement -$5K. I am kind of sceptical about it. I am thinking, if GMAC say "NO", then I will stop my payments to them (I really used all my 401K and other savings already!) and just see if they come back with a settlement offer. I can't think any other options... I will appreciate your suggestions on how to resolve my current situatuion...
    0 Votes

  • 35x35
    Jul, 2009
    Mark
    The equity in your home is just piece of the puzzle in deciding whether to file for bankruptcy. Your mentioning the truck in relation to the second mortgage tells me there may be some significant and relevant facts behind your question that have a bearing on you receiving an accurate answer. I think you need to spend an hour with an attorney in your state to 1) discuss the financial implications of a divorce, 2) talk about the second mortgage and its relationship to the truck and a possible divorce, 3) your filing bankruptcy, and 4) your options to bankruptcy. Look at the Bills.com bankruptcy page to learn more about it.
    0 Votes

  • 35x35
    Jul, 2009
    daisy_chick73
    This is a hard question to ask, but here it is. I have a truck that I paid for with my second mortgage. But I am having a really hard time paying my bills and maybe getting a divorce soon. What I'm wondering is if I get a bankruptcy would that dissolve the second and if we keep paying on the first can we keep our home. We owe around 500K on the home and it was appraised at 650K. What I'm not really clear on is if we have equity can we still declare bankruptcy and get rid of the second.
    0 Votes

  • 35x35
    Jul, 2009
    Bill
    If I understand your first question correctly, you want to know if you will need to pay interest and penalties on the second mortgage. I think you need to clarify the terms and conditions of the second mortgage holder's offer. Regarding your overall question, "Is this a good deal?" the answer is "maybe" and depends on the lender. Some pay hardball. Some are willing to negotiate softer terms. When you talk to the person who offered you the deal, ask them if their collections department has more authority to negotiate better terms. Some do.
    0 Votes

  • 35x35
    Jul, 2009
    Rcecilya
    QUESTION: I took an 80/20 loan in 2005. I am current on my 1st mortgage since my lender for the 1st mortgage agreed to modify the mortage into a fixed rate of 5.2% because it was an adjustable rate before. My 2nd (20%) was a ballon loan worth 26K, my 1st is now 110K. I have been behind on payments on my 2nd and now the lender just informed me that my 2nd was chargedoff on 6/29/09. The lender for my 2nd states that I need to continue making the same payments that I used to make - but I can't afford to make these payments - the lender for the 2nd also told me that since my 2nd has been chargededoff, they will only require me to pay the principle amount which 26K and interest or late payment will not apply?? Please note that I am still current on my 1st mortgage. What should I do? Should I take this offer and continue to make the same payments that I used to make with my 2nd lender? 2nd lender stated that if I don't accept their terms then they will move my file to collections. My credit is already poor as I have other things on my credit that I need to take care of so please advise on what I should do. FL is my state.
    0 Votes

  • 35x35
    Jun, 2009
    Mark
    Cindy - If I understand your question correctly, you are concerned that if or when a first lien holder (which will take the hit in an expected short sale) discovers that a second lien holder got promissory note for its full balance, it will reject the idea of a short sale. I think that's a fair assumption. What the homeowner here is doing is reshuffling the order of the lien holders to benefit one standing later in line. I wouldn't do it. Even if the first lien holder doesn't discover the promissory note right away, the homeowner will have to assume it will.
    0 Votes

  • 35x35
    Jun, 2009
    Mark
    Lisa - as you suggest the second mortgage holder has nothing to gain by pushing forward with the foreclosure, though it is still within their legal right to do so. However, if the homeowner agrees to a restructured payment plan with the second mortgage holder, and then blatantly breaks the terms of that agreement, the second lien holder may act irrationally. We suggest you avoid potentially putting the homeowner in that type of position without their full recognition of what they are doing. It's best to have the conversation with the second lien holder up-front about what the homeowner is able to actually pay, and then negotiate some type of one-time settlement to have the second mortgage holder release their lien. Keep in mind, this might very well be pennies on the dollar, as you pointed out that the second mortgage holder has no reasonable expectation of available equity.
    0 Votes

  • 35x35
    Jun, 2009
    cindy
    IA homeowner wants to get a 2nd lien released from their property and pay it via promissory note. They are hoping they can then sell their house for only the cost of the first lien, which may not be possible due to market conditions. If they ask the first for a short, will having the second removed previously cause a problem with asking the first for a short?
    0 Votes

  • 35x35
    Jun, 2009
    Lisa
    I am a modifier working with a client who is 83 years old. His primary residence first mortgage is 1,960,000.00 and his second is $279,352.00++, his current appraised value is $955,000.00 and as you have guessed this property is in California. I am working with the first mortgage on a modification, second mortgage wont consider modification until the first is complete. IN speaking with the second lien holder the best scenario is a 1% rate for 2 years and up to 5 years on an exception and then it returns to its initial interest rate. They said that he can not go over 120 days late or they will charge off the account. In discussing this with my client and in considersation of the amount of negative equity....would it be advantageous on this case to allow the second mortgage to charge off and then work with them to settle for "less than the amount due"? I mean with the amount of negative equity would/could they even pursue a foreclosure? Im sure they could, but would they? Obviously they arent going to recoup over a million bucks to get anything out of it and they would be paying their attorney to foreclosure. If they were going to foreclose, wouldnt they have filed the required NOD and just set a sale date if thats what they were going to do? He has the cash to make a cash offer at the end and the way I was looking at it, is even if they issued him a 1099 @ 10% taxes....him paying taxes on the amount is far less than paying $279,000 on a property that has lost a mil in value. Do you agree? Please advise, I have done my research and I think I know the answer but I dont want to steer my client wrong without double checking my information. Thank you
    0 Votes

  • 35x35
    Jun, 2009
    Bill
    Purchase money loans in AZ are non-recourse. I am not sure about the exact circumstances where the status of the loan changes. Usually, if you were to refinance an existing mortgage, it would change the status from non-recourse to recourse. As I am not sure if just a payment arrangement changes the status. You should consult with a qualified foreclosure attorney to confirm the status of the loan.
    0 Votes

  • 35x35
    Jun, 2009
    Jennifer
    Hi: I have a a 1st (GMAC) and a second (USAA) 80/20..all money was used to purchase home and I never refinanced. My husband lost his job in april of 08..I held on as long as we could..called usaa to see what they could do to help..They gave me 60 days in Oct of 08 that I did not have to pay and balloon at the end of the payoff. We are 100k under in value (live in AZ). Usaa would not work with us after the 60 days saying that we modified..HA!! (Usaa is my second).. The First is foreclosing on us in August..my question is this.. Can Usaa sue us after the first forecloses, even though they were used ONLY for the purchase of the home since they are saying that I modified in october (repayment plan)?? I keep reading about the "charge-off" thing and my guess is that they will charge it off..but they are saying they will pursue the note after foreclosure..I was under the understanding that if used for the purpose of purchase money they had no recourse...?? Please help.. Thank you.
    0 Votes

  • 35x35
    Jun, 2009
    Bill
    Not likely, as the lender for both your loans was the same, but you should check the terms of your short sale.
    0 Votes

  • 35x35
    Jun, 2009
    Dedet
    We had refinanced our house. We had a 1st & a 2nd on the house both with the same lender. Our lender approved our short sale. House sold and our credit report shows "settled". Can lender pursue a collection on 2nd mortgage?
    0 Votes

  • 35x35
    Apr, 2009
    Erin
    You should try your best to get a loan mod. If you are still current on the loan and your credit is still ok, then it is worth another shot. But if you have missed payments and your credit is shot, you might as well let them charge it off and then negotiate with the collection agency. I am not sure about filing for BK as that would put your home in danger of liquidation, but consult with a bankruptcy attorney, before you do anything.
    1 Votes

  • 35x35
    Apr, 2009
    Bill
    Bruce, that is a great offer, my only concern is that they may send the 1099 at a later point. You need to make sure that they confirm that they will not declare that charged off amount as income, preferably in writing.
    0 Votes

  • 35x35
    Apr, 2009
    Ann
    Hello, I have 2 mortgages on my house - the first is working out a loan mod with us to adjust the payments - i have submitted packages to the 2nd for a loan mod, they are Citimortgage but haven't heard anything, now they are saying that they are going to charge off the loan - they said that i can make a payment today and re-submit for a loan mod but i have submitted paperwork 3 times over the course of 9 months to just have them say they get it and then somehow after more follow-up calls to lose it - my question is what should i do? should i make the payment today and try and get a modification? (although i think they will just "lose" the paperwork again) let it be charged off and try to settle with the collection they give it to? file for BK and try and get it written off or settled though the BK judge? I live in california - any responses would be greatly appreciated.
    0 Votes

  • 35x35
    Apr, 2009
    Bruce
    I have had a offer from gmac/homecomings for a 10% settlement on a 43,000.oo second mortage that is in the charge off state, My attorney said take the deal!! as long as they are not going to 1099 me on the balance. I dont want to miss this opportunity, any advice would be great, as my attorney could not give me a definate answer!! thanks Bruce and family
    0 Votes

    • 35x35
      May, 2011
      Joe
      Bruce, I am in the exact situation as you with the same amount on my second. I have been trying for three months to get GMAC to 10%. Many phone calls later and after much frustration, I am at at about 19%. Can you tell me what you've gone through, and your most recent stastus with this situation? Thank you
      0 Votes

    • 35x35
      May, 2011
      haile
      I am in the same kinds of setuation if you can tell me what you did..??? they just offer me to pay them 10% of the lone,I don't know at this point if I have to pay them or not.
      0 Votes

    • 35x35
      May, 2011
      Bill
      If you are uncertain of an offer you receive from a mortgage servicer, consult with a lawyer who has experience with real estate or contract law. Yes, a lawyer's time is not cheap, but obligating yourself to a bad deal in a lopsided contract is terribly expensive.
      0 Votes

  • 35x35
    Apr, 2009
    Newton
    Jennifer, a loan getting charged off does not mean that you do not have to pay it back anymore. Charge off is just a term that is used by the banks when they write the loan off of their books (accounting term). the debt will still show up on your credit report as past due and the creditor will have many years to follow up on it (as per the statute of limitations in your state of residence). This is also true for your credit card debt. I know that your priority is to save your home, but make sure that according to state law, no liens can be put on your home for all the debts that get charged off, this is a remote possibility but a risk nonethe less. you can check for state laws at http://www.bills.com/collection-laws/.
    0 Votes

    • 35x35
      May, 2011
      Ms.
      What if this debt is appearing on the credit score as charged off with a loan balance od $99k. How can this be taken care of...and how long is before it is removed from the credit report.
      0 Votes

    • 35x35
      May, 2011
      Bill
      Re-read the original answer above, and be certain to follow the link to the IRS page that discusses the Mortgage Forgiveness Debt Relief Act.

      A delinquent account can be reported by the consumer credit reporting agencies (the credit bureaus) for 7½ years from the date of first delinquency.
      0 Votes

  • 35x35
    Apr, 2009
    Jennifer
    I have 2 mortgages with Chase, both obtained to purchase my home in 2006. I am working on the Making Home Affordable Obama plan for my first mortgage and I feel confident that this will work out for me however I am 5 months behind on my 2nd mortgage and they told me they will charge off the account to a collection agency without any future payments. I have attempted to modify both of my loans with Chase, including the second but it seems each time they "lose" my documents or the modification gets sent to a new department to start over. I just spoke to them again this morning and they are asking me to submit my documents AGAIN which will take another 3-5 months. I am afraid that I cannot afford to keep up the monthly payment on the 2nd mortgage in the future, then my efforts for modifying (again) and making any payments will be wasted if they will just charge it off the next time I miss a payment. My question is should I let it just charge off and then try to settle the debt/work out payments with a collection agency? Its for about 31K. I am not making payments on any of my credit cards right now, trying to save money to settle instead. My credit is already crap and we don't plan on buying another home for several more years. I know some would say I'm stupid for letting anything else effect my credit, but I'm ready to just settle and get out of debt that way. The only other debt I have is a car payment which I am up to date on (they modified the loan for me). I appreciate your help and like that this site offers no criticism, only help from others.
    0 Votes

  • 35x35
    Apr, 2009
    Sam
    The most important piece of advice I can give you is this--go talk to a qualified attorney licensed in your state who can help you determine which of the two options offered by your 2nd mortgage lender is the most viable solution given your current financial difficulties. I do not know enough about your situation to tell you what course of action you should take, and it would be irresponsible for me to try to do so. A qualified attorney should be able to tell you whether keeping the home makes sense, or if you should give up the property. He should also be able to tell you if filing for bankruptcy protection is a viable option. I wish you the best of luck!
    0 Votes

  • 35x35
    Apr, 2009
    Julie
    We have a house in foreclosure. When we started the process, we had an offer for short sale. The process to get a short sale approved took so long that we eventually lost the buyer. We then got another offer, which was lower. The 1st mortgage (GMAC) accepted a short payoff, but the 2nd (Chase) had moved into chargeoff. They want $90k (on a $173k loan) to "settle", or $50k (which we could do because the buyer can bring cash) to close and then will pursue the entire deficiency balance of $123k. Our circumstances have changed and we could afford both the 1st and 2nd payments, although our house is $200k upside down (it's an expensive house...). Chase (2nd) said if we move back into the house we need to give them 10% of the balance and will give us 6-9 months to pay and then want 60-70% to settle. The good news is we would then have paid off our 2nd. If we move forward with the short sale, the deficiency would be lower, but we would still have the same scenario of making payments for 6-9 months and then settling. The tax advantage of staying in the house is a wash against paying the 2nd. My question is: what would the 2nd (now in chargeoff and technically not a "2nd mortgage") do to us if we couldn't settle at the end of 6-9 months in either case? What would you advise with regards to staying - or not short selling - the house? We feel like if we have to pay Chase anyway, we might as well live in the house. Bankruptcy is an option, although not a good one because we are business owners (LLC), and also the only kind we would be able to do would be a Chapter 13. We may want to sell the business in 2-3 years, and so we might end up having to pay more on the 13. Thanks for any help!
    0 Votes

  • 35x35
    Mar, 2009
    Bill
    If you got both of the mortgages at the time of purchase (meaning both of your mortgages were purely for the purpose of buying your home), then any balance that remains on either of the loans is non-recourse. Meaning, the lender cannot pursue collection on the balance, so you don't have to worry about the balance. Be careful though as this only applies to your primary residence and the status of the loan changes if you ever refinanced either of the loans, as that would put the loans in "recourse" status. If you still want to, you can look on your credit report to see how this debt is being reported on your credit profile. You can get a free copy of your report at www.annualcreditreport.com.
    1 Votes

  • 35x35
    Mar, 2009
    LD
    I had a 1st and a 2nd mortgage. Two years ago, I tried to keep current, but couldn't. I tried to short sale and even made the mistake of trying to have an invenstor come in and make a deal to sell my house as a short sale. I almost re-financed, but realized that realistically how can you pay more than you make. Well, the 1st foreclosed on my house and after selling it said they did not make enough for the 2nd, so the 2nd "charged off" that debt. I live in California, and I wanted to see what I can do to fix this issue or what are my rights.
    0 Votes

  • 35x35
    Mar, 2009
    Sam
    Jackie--could you please provide some additional information about the circumstances under which AIG paid the second mortgage? Was this some type of lender-paid mortgage insurance (LPMI)? Did you default on your second mortgage payments, resulting in AIG paying off the loan? If that is the case, then you probably would be liable to AIG for its payment to your lender. You can probably settle the debt with AIG, though you will probably need some funds upfront, a good idea of your monthly budget and what you can afford to pay, and an explanation and documentation of any financial hardship which have have led to your defaulting on the loan. I would also encourage you to consult with an attorney to determine if AIG can force you to pay this debt under your state law. If the payment of the 2nd mortgage by AIG did not result from a default, can you please provide some additional explanation of your circumstances? Thanks, and I wish you the best of luck.
    0 Votes

  • 35x35
    Feb, 2009
    Jackie
    I have a first mortgage and a I had a 2nd mortgage. I am still paying the 1st mortgage on time, but the 2nd has been paid in full by AIG who is the insurance company. My home is worth a lot less than the 1st mortgage is worth. I am not concerned with credit, please tell me what it means when the insurance company has paid the debt in full. They have sent a letter asking for me to call to make payment arrangements. I just want to be informed before I make the call
    0 Votes

  • 35x35
    Jan, 2009
    Bill
    Your first mortgage is only looking after their interest and not giving you the complete facts. Here is the deal. Both the mortgage firms have rights to your property, the difference is that the 1st takes priority over the 2nd. For example, if you were foreclosed upon, the 1st mortgage firm would get the first chance to get their money back, and whatever money is left will go to the 2nd mortgage company. Now, if your home is worth less than or close to just your first mortgage, then there will be no money left for the 2nd mortgage. Trust me, if your home was worth enough to pay off both your 1st and 2nd mortgages, nothing can stop the 2nd mortgage firm in starting the foreclosure process. I suspect the reason they are not doing that right now is exactly because of the reason I stated earlier, in that your home not being worth enough to settle their balance. In addition, why didn't you include the 2nd mortgage also in the bankruptcy filing? If you had, then they would be bound by the court ruling would have accepted whatever payment the court would have ordered. I strongly suggest that you consult with your bankruptcy attorney once more, and not base your decisions just on what the 1st mortgage company tells you.
    0 Votes

  • 35x35
    Jan, 2009
    cc
    I am in a similar situation. In July 2007, my husband filed a chapter 13 without my prior knowledge to keep our home from going into foreclosure with 1st Franklin Mortage. All the 1st mortgage and all other debts were included within the chapter 13. However, the 2nd mortgage was sold to real time resolutions, tx. 1st Franklin told my husband at the time he filed the 13 not to worry about the 2nd mortgage but to focus on getting the 1st mortgage caught up because the 1st mortgage is the one that would cause our home to be foreclosed if it went into default. Through the Chapter 13, we made double payments on the 1st mortage and now it is caught up and we recently filled out an applicantion for a loan modification with franklin mortgage and are waiting for them to get back with us. However, we are getting calls and letters from real time resolutions for the second mortgage and we are not able to make payments on that right now due to the chapter 13 payments and catching up arrears on other debts in the bankruptcy. When we bought the house in 04, the it was an 80/20 subprime where the 1st mortgage was $260,000 and second was 50,000. The arrears on the 2nd mortgage is 15,000. Can the second mortgage collector foreclose on the home? 1st Franklin told us that the 1st mortage takes presidence over the 2nd and that only the 1st mortgage holder can foreclose if you default on the 1st mortgage.
    0 Votes

  • 35x35
    Dec, 2008
    Bill
    You should consult with your attorney, but if you can afford the payment then you can probably work out a deal for loan modification to start making payments on your second again. Good luck.
    0 Votes

    • 35x35
      Mar, 2011
      Kathy
      The lender for our second mortgage said that we did not qualify for a loan modification because its in "recovery" and is willing to settle for 10%. I am reading in this forum that even if we settle they can still come after us later is that true? Does tha debt come off and increase equity in our home? Any help would be much appreciated.
      0 Votes

    • 35x35
      Mar, 2011
      Bill
      The devil is in the details. If the contract you sign states that the 10% lump-sum you pay the second mortgagee settles the mortgage, then the other 90% is canceled/forgiven. Take the proposed contract to a lawyer experienced in contracts, who will read the contract in person and can advise you accordingly.
      0 Votes

  • 35x35
    Nov, 2008
    maureen
    i have a similar question we are currently behind on both 1st and 2nd mortgage we were haved filed chapter 13 but my husband lost his job before our first meeting with trustee so now we are probably going to switch to chapter 7, however, we have sold some assets are now able to pay our 1st and second mortgage arrears and bring us current, our first mortgage said they would accept but we haven't talked to our second mortgage yet. We are in charge-off status with them, are they able to, if they want to, accept our payment and bring us current, or is it too late. thank you.
    0 Votes

  • 35x35
    Oct, 2008
    Bill
    A "charge off" does not mean that your second mortgage is no longer secured by your home, and does not mean that the creditor does not still have a mortgage lien on your property. Charge off is simply an accounting term meaning that the lender has moved the debt from its "accounts receivable" books to its "bad debt" ledger. This change in the accounting status has little effect on you or your obligation to the lender, except for that a charged-off account will likely have a negative impact on your credit rating. National banks are required by the federal Office of the Comptroller of Currency to charge off accounts which have not been paid for several months (usually between 180-240 day--the exact time changes periodically). This system is designed to prevent banks from using debts which will likely never be paid to inflate the future earnings projections they provide to investors and regulators. A charge off definitely does not make a secured debt become unsecured. Many lenders will offer to settle on defaulted second mortgages because it can be very difficult for a lender holding a second mortgage to foreclose on a property, especially if the homeowner also has a large first mortgage. A second mortgage is considered a "junior encumbrance" to the first mortgage on a home; in order to foreclose, the second mortgage lender would be required to pay the full balance of the first mortgage out of its own pocket, hoping that the auction proceeds will be sufficient to recoup its costs. If a lender knows that the homeowner has a large amount of equity it may be willing to take this risk, but in most cases second mortgage lenders are not willing to risk so much money with no guarantee of return. Because of the difficulty and potential cost of foreclosure for a second mortgage, many lenders prefer to cut their losses by settling the debt with the borrower. Since second mortgages remain secured debts after charge off, you would probably need to include the debt in your means testing calculations for bankrutpcy. Since I am not licensed to practice law in your state and do am not familiar with the details of your financial situation, I cannot provide you with legal advice. You need to consult with your attorney for a definitive answer to these questions. I wish you the best of luck!
    0 Votes

  • 35x35
    Oct, 2008
    Susan
    I have much the same question as chaz. I am current on my 1st but 2nd has been charged off. I have very specific questions. 1. Does this mean that the debt is now unsecured vs. secured? 1a. If unsecured, then the debt is not taken into account when applying the "means test" for Ch 7 bankruptscy, correct? 1b. Can the bank or collection agency still forclose on the property if debt is unsecured? The effect on my credit is no longer a concern as I already went 90+ days late on my 1st before I was able to get a modification. I just want to know what I need to do to keep my house.
    0 Votes

  • 35x35
    Oct, 2008
    Sam
    If you file for Chapter 13 bankruptcy, you may be able to include the delinquent amount of your second mortgage in your filing, which would bring your 2nd mortgage current and stop the foreclosure action against you. I strongly encourage you to contact an attorney as soon as possible to discuss filing for bankruptcy protection, what options are available to you, and how filing for bankruptcy will affect your pending foreclosure. Filing for bankruptcy will bring your delinquent mortgage balance current, but you will be required to continue making your regular monthly mortgage payments on both mortgages, as well as your Chapter 13 payments, if you wish to keep your home. If you would like to read more about bankruptcy, you can visit http://www.bills.com/bankruptcy/. Good luck!
    0 Votes

  • 35x35
    Oct, 2008
    izzy
    my second mortgage is in default, and my home is going for sale very shortly. I have kept my first mortgage current. if I am not able to work out a payment plan with my second lien holder, is there a posibility that if I file bk, they can reinstate my 2nd mortgage?
    0 Votes

  • 35x35
    Mar, 2008
    Dee
    What if your second mortgage was in "closed/charge off" status and you are going through a "short sale" with your first mortgage company? They are the same company (first and second mortgage). What happens then?
    0 Votes

  • 35x35
    Mar, 2008
    Bill
    A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure. If your lender has agreed for a short sale, then the remaining debt on the first mortgage will be forgiven. Now, even though the second mortgage is from the same company, they still might try to collect on it. I would clarify with the mortgage company to find out exactly what will happen in your case.
    0 Votes

  • 35x35
    Mar, 2008
    Nathan
    I think you are referring to the title of your property when you say "lien situation". Your second mortgage company has secondary rights to your property, meaning, in the event of a foreclosure your primary mortgage will be paid first and the remaining funds will be applied to your second mortgage. Sometimes, lenders employ the services of a collection agency to recover past due amounts. This means that although you are getting calls from a collection agency, the title of your home is still held by the lender of your second mortgage. It might also be the case that the collection agency now owns the title as they bought the debt from the second mortgage lender. I think it is a good opportunity for you to settle the debt as the collector is giving you an opportunity to do so. Remember that charge off is only an accounting term used by these companies and does not mean that you are absolved of the debt. The lender may file a suit at any time even after a charge off status.
    1 Votes

  • 35x35
    Mar, 2008
    chaz
    My second mortgage has gone into charge off - I recieved a letter from a bil collector asking for a 50% settlement.. My question is what is the lien situation with my hone at this point? does the bill collector own the lien now? How does that that work? Charlie
    6 Votes